Fitch Ratings yesterday cut its credit ratings on Acer Inc (宏碁), five days after the world’s No. 4 PC vendor revised downward its shipment forecast for this year.
Fitch said it downgraded Acer’s long-term foreign and local currency issuer default ratings (IDR) to “BB+” from “BBB-.”Under Fitch's criteria, the “BB+”is the highest level of “speculative” or “junk” status, one notch below the lowest “investment grade” rating. At the same time, Fitch also cut Acer's national long-term rating to “A-(twn)” from “A(twn).”
The agency yesterday said the outlook on Acer’s credit ratings was negative, meaning that they could be downgraded further.
“Acer’s financial performance over the past year has been much worse than Fitch’s previous forecast and the company underperformed its major peers in terms of operating income and margin,” Fitch said in a statement.
The agency said the downgrade reflected Acer’s weakening competitiveness in the global PC business.
“Acer’s position in the global PC market has consistently weakened since its market share peaked in 2009. Acer’s growth in the Asia-Pacific region was unable to offset its market share loss in EMEA [Europe, the Middle East and Africa] and the US,” Fitch said.
The Taiwanese firm is facing strong headwinds linked to the eurozone debt crisis and global economic uncertainties.
On Friday last week, Acer revised down its full-year PC shipment forecast to flat to 5 percent growth from last year, compared with its previous forecast of annual growth of up to 10 percent. The company also forecast flat to 5 percent growth sequentially for third-quarter shipments.
Fitch said sales of Acer’s netbooks, previously an important product, have struggled to compete with tablet computers.
Moreover, the company is suffering from a prolonged PC replacement cycle as global economic uncertainties weigh on consumer purchases, it said.
Acer could see a “mid-single digit” decline in revenue this year and its operating earnings before interest and tax margin could fall below 1 percent this year because of “competitive pricing pressure and many consumers’ preference for media tablets over PCs,” Fitch said.
Last year, Acer reported its first net loss since 1995 at NT$6.62 billion, or a net loss of NT$2.52 per share, with a consolidated revenue of NT$475.49 billion, down 24.4 percent year-on-year.
Shares in Acer fell 2.48 percent to NT$27.50 yesterday, down 21.65 percent so far this year.