Acer’s small profit may not be enough: analysts

By Helen Ku  /  Staff reporter

Thu, Nov 07, 2013 - Page 13

Acer Inc (宏基) may post a small profit next year after disposing of as many intangible assets as it can, but whether the world’s fourth-largest PC maker can stand on a solid footing remains a big question, analysts said.

The company reported a net loss of NT$13.12 billion (US$442.19 million), or a loss per share of NT$4.82, last quarter, after a NT$9.94 billion write-off of goodwill and other intangible asset impairments related to the company’s sub-brands such as eMachine, Packard Bell and Gateway.

“The one-time goodwill impairment charge was necessary and should have been made because those sub-brands contributed little help to Acer except added burden,” Fubon Securities Co (富邦證券) analyst Arthur Liao (廖顯毅) said by telephone.

Counting the one-time charge, the company is forecast to report a net loss of NT$12.81 billion this year, worse than the NT$2.91 billion loss last year, Liao said.

However, after cutting up to 7 percent of the company’s global workforce to streamline its operations, Acer could see a net profit of NT$955 million, or earnings per share of NT$0.35, next year, he added.

“It is unacceptable to see Acer transform itself from a PC maker to a mobile device seller at such a slow speed, but at least the company has started making some progress,” Liao said.

Acer has focused on emerging markets by selling a large volume of low-priced smartphones and tablets in order to survive in the market. Yet as long as the firm can keep its operating expenses under control, there remains a likelihood it can turnaround in the long run, he said.

Yuanta Securities Co (元大證券) downstream tech analysis unit head Vincent Chen (陳豊丰) said by telephone that Acer’s entry into the smartphone and tablet segments may help boost its business next year, but not for too long.

Rather, there is a strong likelihood that Acer’s ongoing streamlining efforts are aimed to get the company prepared for future mergers and acquisitions, he said.

“After all, the whole PC market is playing a ‘value game’ where each player, based on its business scale, seeks to win greater rebates from different industry partners,” Chen said. “In addition, most potential buyers tend to acquire firms that have simple business structures and that remain profitable.”

Chen forecast Acer will post a net profit of NT$1.62 billion, or earnings per share of NT$0.5, next year after reporting NT$17.83 billion in net losses, or NT$5.75 per share, this year.

On Tuesday, Acer chairman and chief executive officer Wang Jeng-tang (王振堂) tendered his resignation to shoulder responsibility for the company’s continued losses. He is to hand over his CEO position to president Jim Wong (翁建仁) in January and then resign his chairmanship in June next year.

Acer said it had also established an advisory committee, led by the company founder Stan Shih (施振榮), to come up with strategies to differentiate its products and gain market share.

However, analysts said it is too early to predict if the changes will bring enough help to the company, with Goldman Sachs warning that its weakening financial position could add pressure to its research and marketing investments, while Bank of America Merrill Lynch forecast another loss-making year next year for Acer because of its management’s lack of execution and direction into the post-PC era.

Acer shares tumbled by the maximum daily 7 percent limit to close at NT$16.9 yesterday.