BenQ said LITE-ON IT will take over its optical storage business in exchange for 1.2 bln twd in cash and a 13 pct LITE-ON stake in an agreement reached today.

The strategic alliance is expected to bring together two of the industry's leading players and enhance the overall competitiveness of Taiwan's storage sector. The transaction is expected to increase Lite-On IT's global market share to 27%, making it the world's No. 2 optical disk drive (ODD) maker, behind Hitachi-LG Data Storage (HLDS).

As part of the alliance, Lite-On IT will acquire BenQ's storage-related assets, including BenQ's ODM customer portfolio and the rights to use BenQ's technology portfolio. Lite-On IT will also receive order commitments on BenQ-branded storage products. Additionally, BenQ will acquire two seats on Lite-On IT's board of directors.

BenQ will be the latest addition to LITE-ON IT's existing client list, which includes Japan's Sony and NEC.

BenQ's joint venture with Philips, Philips BenQ Digital Storage, will not be affected by the deal, according to BenQ. Philips BenQ will continue to design and develop optical drives, while Lite-On will manufacture the drives instead of BenQ.

LiteOn is also expected to announce its plans for its first Blu-Ray device later this year.

"This strategic alliance combined with our manufacturing advantages, will allow Lite-On IT to further sharpen its competitiveness in the ODM market and become the No. 2 ODD manufacturer worldwide," expressed Raymond Soong, Chairman of Lite-On IT. "In partnering with BenQ, Lite-On IT expects to benefit from increased manufacturing efficiency, greater economies of scale, and a larger market share."

"We believe our customers will benefit from this powerful partnership," commented K.Y. Lee, Chairman of BenQ Corporation. "BenQ will continue focusing on the marketing and sales of our storage products and this strategic transaction will allow BenQ to better address our ODD branded and 3C opportunities and customers' needs," added Mr. Lee.

BenQ, which counts top PC giants such as Dell and Hewlett-Packard as major clients, has been aggressively marketing its own brand globally, selling laptops, LCD TVs and digital cameras under its own name.

Both companies expect to close the transaction on or about 1 June 2006.