The share price of Acer Inc (宏碁) rose by an anemic 0.48 percent as the PC maker’s newly unveiled plan to acquire privately held cloud-computing company iGware Inc for US$320 million was given a thumbs down by investors, who worried that the expensive deal would not immediately help the company.
Shares in the world’s No. 4 PC maker increased NT$0.2 to NT$41.55, while the share price of the world’s No. 5 PC company, Asustek Computer Inc (華碩), advanced 1.02 percent to NT$296. The benchmark TAIEX went up 0.55 percent.
The “transaction appears expensive given iGware’s small scale,” Morgan Stanley said in a report yesterday.
Morgan Stanley said it expected “no material profit contribution in the near term. We think it will also be a challenge for Acer, a hardware--centric company, to lead and utilize a software company.”
Robert Cheng (鄭勝榮), who tracks the notebook computer industry for Bank of America Merrill Lynch, said in a report on Thursday that “Acer should stabilize its PC business first.”
That was despite the fact that the purchase of iGware would help Acer develop its cloud--computing services, which was good from a long-term point of view, Cheng said.
The acquisition of iGware “cannot generate sales or profit contribution in the coming two quarters at least and Acer’s cloud product might be launched in 2012. [The deal] cannot help Acer overcome its current difficulties,” he said.
On Thursday, Acer chairman J. T. Wang (王振堂) told reporters at a press conference that the acquisition of iGware would have a medium to long-term impact on the company.
“The deal will be crucial for Acer to boost its brand value in the next five to 10 years,” Wang said.
Acer is scheduled to unveil its first cloud-computing services, dubbed Acer Cloud, some time next year, enabling users of its hand-held devices to share data and synchronize files, among other things, Wang said.
However, Arthur Hsieh (謝宗文), an analyst with UBS Securities Pte Ltd in Taipei, said he was not sure whether iGware’s previous work for Japan’s Nintendo Inc could be considered successful given that it could not defend against the competition from Microsoft’s game console Xbox 360 with Kinect.
“A cloud [platform] without an attractive service is unlikely to add value to a brand and therefore it will not be a true differentiator,” Hsieh said yesterday.
UBS retained a sell rating on Acer and trimmed its 12-month target price on the stock to NT$38 from NT$40 previously.
Acer is expected to swing into the red in the second quarter because of US$150 million in inventory write offs and lower PC shipments as tablet devices cannibalize notebook computer sales, analysts said.
Acer would lose NT$4.85 billion (US$168 million) in the quarter from April to last month, while revenue would decline by 15 percent quarter-on-quarter to NT$108.76 billion due to weak demand in Europe, Morgan Stanley said.
Revenues from the European market account for 40 percent of Acer’s overall revenues, according to the PC maker.
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