Mon, Mar 25, 2013 - Page 14 News List

Acer plans product line revamp

By Helen Ku  /  Staff reporter

Despite being upbeat on tablet shipment growth this quarter, Acer Inc (宏碁), the world’s fourth-largest PC brand, might take more time to revamp its product scale to revive its sales growth momentum this year, analysts said.

Acer said in an investors’ conference call last week that it planned to increase its research and development expense to between 1.2 percent and 1.5 percent of annual sales this year to stay competitive in the tablet computer market, while improving its notebook product mix.

The company said it expected to achieve a single-digit percent year-on-year growth in notebook shipments this year, while setting a higher goal for its tablet shipment of between 5 million and 10 million units.

However, Deutsche Bank analyst Ivy Lee (李怡璿) said Acer, though moving in the right direction, might encounter certain risks in its transformation that causes it to see sales remain flat. The risks include unclear market feedback on its Windows 8 notebooks and tablets, Lee said in a report dated on Tuesday.

In addition, an increase in Acer’s R&D budget might offset the company’s goal of continually improving its gross margins this year and drag down its operating profits as well, she said.

Acer has been trying to adjust its product portfolio and become less aggressive on pricing and channel push, since the company experienced huge inventory loss in the second and third quarter in 2011.

While the Taiwanese company is facing the same problem as the US-based Dell Inc in terms of margin erosion and falling market share, Acer has not looked into pricing strategies to regain market share, instead writing off brands to improve its gross margin.

That led Acer to post nearly a record-high gross margin last quarter after it posted 11.4 percent gross margin for the fourth quarter in 2010.

However, Citigroup Global Markets analyst Kevin Chang (張凱偉) said in a note dated on Wednesday that Acer still struggles to break even, which shows “Acer’s current strategy is not working, clearly evidenced by its improving gross margin, but faltering operating margin.”

To rebuild scale, Acer has either to be more aggressive on pricing or the PC industry has to come back in a big way, Chang said.

Given the downbeat outlook for the PC market in the second half of the year, Acer is likely to continue to struggle around the break-even point because it still operates on a very small scale, he added.

Citigroup, which said it had seen signs of a demand slowdown for PCs after the launch of the Windows 8 operating system, forecast laptop shipments this quarter would drop 15 percent quarter-on-quarter, worse than the usual 10 percent seasonal decline.

With Lenovo Group Ltd (聯想) and Asustek Computer Inc (華碩電腦) trying to gain more share and both Dell and Hewlett-Packard Co striving to maintain their scales, price competition in the PC market is forecast to become fiercer, Chang said, adding that he forecast Acer could see profits fall in the second half of the year.

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