Mon, Aug 12, 2013 - Page 13 News List

Analysts doubt Acer’s upbeat forecast

IRRECONCILABLE:Acer said it would grow its mobile PC products by up to 5 percent this quarter, however analysts have forecast sales will shrink by 15 percent this year

By Helen Ku  /  Staff reporter

Acer Inc (宏碁) aims to break even this quarter in terms of operating level, but analysts said it is just the company’s wishful thinking.

The world’s fourth-largest PC maker said it also expects its mobile PC products, including notebooks, netbooks and tablets, to grow by between zero and 5 percent sequentially this quarter. However, some analysts disagree.

Citigroup Global Markets Inc analyst Kevin Chang (張凱偉) said Acer’s notebook shipments could decline between 5 percent and 10 percent quarter-on-quarter this quarter, while KGI Securities Co (凱基證券) analyst Angela Hsiang (向子慧) predicted the company’s notebook and tablet shipments would contract by 15 percent to 25 million units this year from 30 million units last year.

“Things have deteriorated even faster than expected, given poor consumer demand and touch panel notebook inventory correction,” Chang said in a note on Friday.

On Thursday last week, Acer reported operating losses of NT$613 million (US$20.48 million) in the second quarter, with net losses of NT$343 million, or NT$0.13 a share.

Chang said Acer is likely to report sequential operating losses, given further deterioration in the company’s product mix, and he disagreed with the company that Microsoft Corp and Intel Corp together could make efforts to push consumers to purchase touch-enabled PC products.

“We’ve long been dubious of PC makers’ optimism on touch notebook penetration, as we struggled to understand the practical user case for touch panel on notebooks,” Chang said.

Hsiang said in a separate note that the company’s competitiveness will remain weak in the near term because it will take time to enhance its operating margin.

According to tallies compiled by Gartner Inc, Acer’s share of the global PC market fell to 8.3 percent in the second quarter from 11.4 percent in the same period of last year.

While worldwide PC shipments fell 10.9 percent in the second quarter from a year earlier, Acer saw an even larger decline of 35.3 percent year-on-year during the same period, Gartner said.

JPMorgan Securities Ltd analyst Gokul Hariharan said Acer’s problem is that the company is struggling to defend its market share “in a shrinking PC market.”

“Acer’s strategy of increasing spending on research and development is a right one, timing for the company to execute the strategy came at a time when the market is commoditizing,” Hariharan said in a note on Thursday.

Given that end market conditions are not recovering and that investments in product research and development affects the company’s profitability, Hariharan said he “sees limited upside for Acer’s earnings growth.”

For this year, Citigroup forecast Acer would post losses per share of NT$0.04, down from an estimate of NT$0.19 in earnings per share (EPS), with losses per share of NT$0.04 next year, down from an estimate of NT$0.02.

KGI forecast EPS of NT$0.03 for Acer this year and NT$0.28 next year, while JPMorgan estimated NT$0.4 this year and NT$1.1 next year.

Acer’s shares closed down 1.7 percent at NT$20.2 on Friday. Citigroup retained its target price on the stock at NT$18, but JPMorgan cut its price to NT$16 from NT$20.

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