Fitch Ratings Ltd yesterday cut its credit rating on Acer Inc (宏碁), a week after the world’s fourth-largest notebook vendor said its gross margin fell to 8.5 percent in the first quarter — the lowest in five quarters — because of increased shipments of budget tablet computers.
Fitch analysts Kelvin Ho and Alvin Lim said in a report released yesterday that they downgraded Acer’s long-term foreign and local currency issuer default rating to “BB” from “BB+” to reflect its subdued outlook for the global PC industry, the continued deterioration of Acer’s market position and the firm’s low profitability.
Under Fitch’s credit rating scale, “BB” is the second-highest level in “speculative” or “junk” status, two notches below the lowest “investment-grade” rating.
Fitch also downgraded Acer’s national long-term rating to “BBB+(twn)” from “A-(twn).”
The agency added that its outlook on Acer’s credit ratings was negative, hinting that they could be downgraded further.
Ho and Lim said Acer had been underperforming in the global PC market in terms of sales and margins after its market share peaked in 2010.
Citing data from US-based market researcher International Data Corp, Fitch said Acer’s global PC shipments declined 31 percent year-on-year in the first quarter of the year, while its market share shrank to 8 percent from 10 percent during the same period last year.
“Acer continues to confront a number of headwinds in the PC market,” they said in the report.
Ho and Lim said weak economic growth in developed countries had lengthened the PC replacement cycle, while global PC demand has also been affected by substitute devices like smartphones and tablets.
They added that newer PCs running Microsoft Corp’s Windows 8 have yet to make a significant impact on Acer’s bottom line and fierce competition among notebook vendors is likely to drive down the company’s margin further.