Mon, May 13, 2013 - Page 13 News List

Brokerages pessimistic on Acer recovery

‘UNDERPERFORM’:Acer’s positive outlook on the PC market did not convince foreign brokerages, who said its pricing strategy was risky in an increasingly competitive sector

By Helen Ku  /  Staff reporter

Foreign brokerages remain downbeat on Acer Inc’s (宏碁) recovery prospects, despite the company last week giving a better outlook for the PC market this year.

The company is also optimistic about the notebook sector because it sees a positive development in major PC operating systems such as Microsoft Corp’s Windows, Apple Inc’s iOS and Google Inc’s Android.

“To consumers, this diversity [in operating systems] is a plus as it offers them more choice,” Acer chairman and chief executive Wang Jeng-tang (王振堂) told an investors’ conference on Wednesday.

Wang also said that Microsoft’s efforts to communicate more with its hardware partners such as Acer and its plan to upgrade the Windows 8 operating system to make it more user-friendly would boost the shrinking notebook industry.

However, Credit Suisse analyst Thompson Wu (武光明) said Acer needed to keep in mind that the “go-to-market model” it has applied in the past is no longer suitable.

“The company’s solution is to focus its efforts on design and branding, and hope to lure customers back,” Wu said in a note to clients on Friday.

He said that Best Buy Co’s, the world’s largest consumer electronics retailer, decision to make Acer’s high-end R7 notebook an exclusive product on its shelves reflects the computer maker’s aggressive marketing as well as its increased expenditure on research and development.

Wu retained his “underperform” rating for Acer shares, keeping his target price unchanged at NT$21.

In addition to notebooks, Acer is gearing up to launch touch-enabled devices, including low-priced tablets, ultrabooks and all-in-One PCs, to increase revenue and expand its product portfolio.

However, JPMorgan Securities Ltd analyst Gokul Hariharan was cautious about the company’s strategy of pricing its tablet low in the wake of its operating margin’s weak recovery.

Acer’s “tablet margins are close to break-even levels and it competes primarily in the low-end market,” Hariharan said in a report on Wednesday.

As strong demand of Apple’s iPad minis has driven all brands to set their prices close to US$150, competition in the low-priced tablet market will become tougher in the second half of the year, he said.

JPMorgan also maintained its “underweight” rating for Acer shares and set a target price of NT$20, the report said.

Meanwhile, in a filing submitted to the Taiwan Stock Exchange on Friday, Acer reported that sales last month fell to NT$25.77 billion (US$866.71 million), a drop of 31.01 percent month-on-month and 18.8 percent year-on-year.

In the first four months of the year, the company’s accumulated sales declined 18.79 percent to NT$117.58 billion from NT$144.78 billion in the same period last year.

Acer shares closed down 1.63 percent at NT$24.1 on Friday.

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