Tue, Jan 21, 2014 - Page 14 News List

Acer shares dive, expected sales drop

DISAPPOINTING RESULTS:Analysts warn that investors might not see operational turnaround until next year, given a steep sales decline and tough PC industry outlook

By Kevin Chen  /  Staff reporter

Acer Inc (宏碁) shares plunged yesterday as the company faces mounting pressure to produce meaningful turnaround signs after reporting disappointing results for the final quarter of last year.

Barclays Capital Securities Taiwan Corp reiterated its “underweight” rating on Acer’s shares and suggested that investors should stay away from the stock for the moment.

“Meaningful signs of an operational turnaround ... might not happen before the second half of 2014, but more likely in 2015,” Barclays analysts Kirk Yang (楊應超) and Ava Chang said yesterday in a client note.

Shares in Acer ended down 3.95 percent — its biggest one-day loss in two months — to NT$18.25 on the Taiwan Stock Exchange, rebounding from as low as NT$18.1 in the morning session.

PRICE DISCOUNTING

On Friday last week, the world’s fourth-largest PC maker said its operating loss was NT$8.22 billion (US$271.7 million) in the October-to-December quarter, worse than market consensus of a NT$2.8 billion loss due to intensive price discounting across its product lines.

With NT$1.3 billion write-offs in raw material inventories and other costs, as well as another NT$4.5 billion of restructuring charges, Acer said its net loss reached NT$7.63 billion last quarter, or a net loss per share of NT$2.8.

However, sales for last quarter were in line with market forecasts to total NT$86.7 billion, down 15 percent year-on-year and 6 percent quarter-on-quarter last quarter.

Barclays expects muted outlooks for Acer in this quarter and for the whole of this year, forecasting the company’s sales to decline by a double-digit percentage rate this quarter with another operating loss.

“It would be hard for Acer to break even operationally in 2014, given all the headwinds,” Yang and Chang said. “We would not be surprised to see more future write-offs on inventory, intangible goodwill, employee redundancy or all of the above.”

NEW STRATEGY

HSBC Securities Taiwan Corp researchers led by Jenny Lai (賴惠娟) agreed, and said the company’s sales for this quarter might drop 25 percent quarter-on-quarter.

“Given lower revenue, we believe Acer will continue to run an operating loss in the first half of 2014, but that profitability could improve in the second half if new product launches are successful,” they said in a separate note.

HSBC retains its “underweight” rating on the stock.

Acer’s new president and chief executive officer Jason Chen (陳俊聖) is banking on the development of cloud-computing services to help transform the PC maker into a “hardware plus software and services” company.

He said on Monday last week that as soon as April 1, all of Acer’s desktop, laptop, tablet and smartphone customers should be able to access the company’s cloud services, dubbed “Build Your Own Cloud.”

At least one analyst expressed caution about the company’s new strategy, and said Acer is still a hardware company and that the sales contribution from cloud services would be hard to gauge.

“At this point, we are not clear about Acer’s new product strategy,” UBS Securities Pte Ltd Taipei branch analyst Arthur Hsieh (謝宗文) said. “We believe it may lose further market share before it can come with attractive new products.”

UBS Securities maintains its “sell” rating on Acer and expects the company to take a long time to make a turnaround, given the challenging PC industry outlook.

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