Acer transformation nears after Wistron unit splits off

INFORMATION TECHNOLOGY: The computer giant has decided to break off its manufacturing arm in an effort to prevent conflicts with some of its major customers

By Dan Nystedt  /  STAFF REPORTER

Wed, Apr 17, 2002 - Page 17

Acer Inc (宏電), one of Taiwan's oldest and most renowned technology companies, is preparing to sell off its contract manufacturing unit, Wistron Corp (緯創資通), between the second and third quarter next year, in a bid to finalize a reorganization plan begun in 2000.

Acer hopes to become a worldwide powerhouse in information technology services, software and sales of its brand-name products, including personal computers, notebook PCs, personal digital assistants and other computer-related products.

"Acer operations have just become too big and too complex," chairman Stan Shih (施振榮) said when he announced the reorganization plan two years ago. At the time, many analysts were not convinced the company would ever unload its manufacturing arm -- weak Acer brand name sales had made the company depend heavily on contract manufacturing for operating revenue.

The company also manufactures personal computers and notebook PCs for multinationals such as International Business Machines Corp (IBM). Acer products compete with its own customers, often creating friction.

In response, Acer has separated the contract manufacturing arm of the company into a separate business unit called Wistron. Acer plans to sell off over half its stake in Wistron this year. It plans to lower its total holding in Wistron to around 30 percent by the end of 2003.

Acer has already shifted some notebook-PC orders from Wistron to Compal Electronics Inc (仁寶電腦), one of Taiwan's largest notebook-PC makers. Of the 1 million notebook PCs Acer expects to ship this year, between 30 percent and 35 percent will be manufactured by Compal. Wistron will make the rest. Wistron officials hope to break free from Acer even earlier. If the government approves a split under the company merger law, Acer and Wistron will break early next year. Wistron officials want to become listed on the TAIEX by the end of February 2003, if the process moves fast enough.

The company expects sales to reach NT$101 billion this year, up by around 30 percent year on year and putting it in the same league as other top contract manufacturers in Taiwan, such as Quanta Computer Inc (廣達電腦), Compal and Hon Hai Precision Industries Co (鴻海精密). Wistron anticipates profits of NT$3 per share this year.

Wistron expects that new orders from companies such as Dell Computer Corp (for computer parts) and Microsoft Inc (for Xbox game consoles) will replace orders that formerly came from Acer.

Including subsidiary companies, executives at Wistron said the group could see sales as high as NT$120 billion to NT$130 billion. AOpen Inc, Wistron Newave Corp, Wistron Nexus Inc, Anextek Global Inc, Wistron Software Corp (宏創) and Playcoo Corp are all members of the Wistron group of companies.

Last year, Wistron had net sales of NT$74.8 billion (US$2.2 billion), while the Wistron Group had combined sales of NT$96 billion, according to the company.