Thu, Aug 25, 2011 - Page 12 News List

Acer sinks into red in second quarter

RESTRUCTURING:While the embattled PC maker expects losses to contract in the third and fourth quarters, its CEO said it would be impossible to break even this year

By Jason Tan  /  Staff Reporter

Acer Inc (宏碁), the world’s No. 4 PC brand, yesterday reported its first quarterly loss in almost a decade because of inventory write-offs and layoff expenses at its Europe, Middle East and Africa (EMEA) operations.

Second-quarter losses, which reached NT$6.79 billion (US$236 million), “were bigger than expected,” Acer chairman and chief executive officer J.T. Wang (王振堂) told an investors’ teleconference.

“Our earlier target of trying to break even has now become impossible,” Wang said.

The company, which booted out Gianfranco Lanci as CEO and president in late March, will continue to clear inventory into the current quarter amid global economic uncertainties, Wang said.

Acer wrote off US$150 million in sales allowances to clear excess inventory and spent another US$30 million on layoff-related expenses at its EMEA operations in the second quarter.

Hefty severance packages to a handful of key executives leaving Acer also added to the deficit, the company said.

The company’s restructuring will continue through the end of this month, said Wang, while adding that third-quarter losses should contract and fourth-quarter results would “improve a lot” from the previous quarter.

Acer’s consolidated revenues were NT$229.9 billion in the first half, declining 26 percent year-on-year. Its net loss reached NT$5.6 billion, or a loss of NT$2.12 per share, during the same period.

“While a lot of these are one-timers, and things might recover in the second half, you just don’t see Acer as the same Acer it used to be when it was a solid execution machine gaining market share,” Samsung Securities Co analyst Steven Tseng (曾緒良) told Bloomberg yesterday. “It will be difficult to defend its market share.”

Acer fell to fourth place in terms of global market share in the second quarter from second place a year earlier, as Dell Inc and Lenovo Group Ltd (聯想) overtook it and leader Hewlett-Packard Co (HP) maintained its position, according to Gartner Inc.

Acer is set to launch its first Ultrabook laptops next month, with price tags of between US$799 and US$1,199.

Ultrabook shipments would account for 3 percent of Acer’s total notebook sales by the end of the year, company president Jim Wong (翁建仁) said.

Ultrabooks — Intel-powered ultra-slim notebooks that offer tablet-like features — would take up 25 to 35 percent of Acer’s total notebook shipments next year, Wong added.

“We see ‘tablet fever’ going down,” Wang said. “Notebooks are regaining consumers’ interest ... Ultrabooks offer good battery life, instant power on and attractive selling prices.”

Hailing Ultrabook as a new breakthrough in the PC industry, Wang said he has high hopes that they would revive notebooks’ sluggish sales.

Acer’s sales of Iconia tablets did not gain much fanfare and yesterday the company again adjusted downward its projections for tablet shipments to 2 million to 2.5 million units, from its forecast of 2.5 million to 3 million made in June.

The company had vowed to ship as many as 7 million tablets early this year.

Commenting on HP’s plan to spin off its PC unit, Wang described it as an opportunity.

“We will continue to devote [our efforts] to PCs, tablets, netbooks and mobile devices to gain [market] share,” he said.

Acer dropped 2.92 percent to NT$31.55 on the Taiwan Stock Exchange before the earnings conference, as investors were apprehensive about its second-quarter results.

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