Sept. 29 (Bloomberg) -- Shares of Benq Corp., Taiwan's biggest cell-phone maker, rose by their daily limit to a one- month high after the company said it will stop funding a German handset unit to stem losses.

The stock climbed 7 percent to NT$19.45 at the 1:30 p.m. close, compared with a 0.03 percent decline in the island's benchmark Taiex index. The German unit, Benq Mobile GmbH & Co., filed for insolvency protection today, its spokesman Stefan Mueller said.

Benq shares have tumbled almost 40 percent this year on concern the Taipei-based company would face greater losses after it took over Siemens AG's unprofitable mobile-phone unit last October. Benq, which estimates it lost 600 million euros ($762 million) in its mobile business, now expects a narrower loss in the fourth quarter.

``Benq has cut off a lump that threatened the health of its entire operation,'' said Eric Chou, manager of the NT$2.8 billion ($85 million) Hi-Tech Fund at Jih Sun Securities Investment Trust Co. ``It's a big load off Benq.''

The company yesterday said its mobile-phone units in Brazil and ``other locations'' are reviewing their financial positions. The German unit employs about 3,000 people.

``We are excited to see such a clear-out strategic decision being made to stem losses,'' said Dominic Grant, a Taipei-based analyst at Macquarie Securities Ltd. ``A number of uncertainties remain, such as timetable, legal issues and to what degree the losses will be cut. However, this is a positive development.''

The brokerage maintained its ``outperform'' recommendation on the stock.

Pushed Back Targets

Munich-based Siemens agreed to pay Benq 250 million euros to take control of its mobile communications unit, in a transaction announced on June 7, 2005. Benq said at the time it can shave procurement and production costs by as much as $500 million and gain ``revenue synergies'' of a similar amount by 2006, as it combines production and sales channels.

The company also said at the time that the acquisition may boost sales of Benq's other products such as computers and music players, leveraging on Siemens' branding in Europe.

After forecasting the handset unit would be profitable by the end of this year, Benq last month pushed back the target to the third quarter of 2007 at the earliest because of slower-than- anticipated sales.

The global market share of Benq, which shipped 7.25 million handsets in the second quarter, fell to 3.2 percent in the period, from 3.5 percent in the first quarter, according to an Aug. 24 report by researcher Gartner Inc.

No Revised Estimates

Benq Chairman K.Y. Lee forecast in January, when the company rolled out its first Benq-Siemens mobile phones, that 2006 revenue may gain 90 percent to more than $9 billion, helped by the sales of co-branded handsets.

Benq didn't provide revised earnings forecasts yesterday. The company on Aug. 24 reported its third straight quarterly loss, of NT$2.51 billion, in the three months ended June 30 because of handset delays and increased marketing costs for the Siemens unit.

``In the long term, it looks negative because Benq's reputation will be hurt,'' said Peter Wu, who manages the NT$1.5 billion Invesco Taiwan Technology Fund. ``In the long term, I don't think the stock will rise.'' The fund holds 1 percent of Benq.

The company's mobile-phone division accounted for 36 percent of second-quarter sales, rising from 35 percent in the first quarter and 9 percent a year earlier. Benq said yesterday it will continue its branded mobile business in ``selected markets,'' without giving details.

``The company's strategy is not any more clear now, it's even more unclear,'' said Wu.

To contact the reporter on this story: Theresa Tang in Taipei at ttang3@bloomberg.net

Last Updated: September 29, 2006 06:12 EDT