“Is big beautiful?” Not for Acer Inc (宏碁). That is the message the world’s No. 2 PC maker sent recently with the departure of chief executive Gianfranco Lanci.
This change of tack came after company missed its revenue target for the second-straight quarter, which sent the firm’s stock price into a tailspin, a reflection of Acer’s failure to fully grasp the threat posed by tablet devices to the PC sector.
Acer’s share price has now plunged more than 22 percent since the company said it would be unable to meet its first-quarter revenue forecast of 3 percent growth quarter-on-quarter.
However, the disappointing business outlook is just the precursor to major change at Acer, because the 30-year-old PC company’s “winning formula” has stopped working, founder Stan Shih (施振榮) said.
Lanci’s resignation is essentially a declaration that the company has given up on its longstanding goal of becoming the world’s No.1 PC maker and is finally ready to embrace the post-PC world.
“Lanci held different views to a majority of board members,” Acer said in a statement released on Thursday. “They placed different levels of importance on scale, growth.”
By challenging Apple Inc and HTC Corp (宏達電) for a share of the fast-growing smart handheld device market, Acer is now to focus on becoming the leading smart handheld device company in the world, a strategy favored by a majority of the board.
“Acer has to change its mindset. Being the world’s No. 1 PC company is not important. The company should undergo restructuring and think about how to increase profit rather than seek volume growth,” said Shih, who holds a seat on the firm’s nine-member board.
Acer posted a 1.79 percent profit margin for the third quarter of last year, the company told investors in an impromptu meeting after the announcement of Lanci’s departure. That could improve to 2 percent in the first quarter of this year.
That is low for a company that created NT$597 billion (US$20.44) in revenues last year.
It is also a long way behind HTC’s 16.1 percent net profit margin during the fourth quarter of last year, while HTC made NT$278.8 billion in revenue last year.
Although Acer’s new strategy of seeking growth through mobile devices, including tablets and smartphones, is sensible, the company, like most other Taiwanese enterprises, has played it safe for too long, during which time it cut back on investment in research and development to build up Acer as a valuable brand.
The company faces an uphill battle to reshape its brand image, never mind the obvious difficulty in building a network to sell content such as music to PC, tablet and handset users.
That is the reason most investors voted against Acer’s gambit, as reflected in the stock’s almost 5 percent fall on Friday after the board decided to buy back 54 million shares, or 2 pecent of the company’s share capital.
Some foreign investors reiterated their sell rating on Acer, but slashed the stock’s target price to as low as NT$46.2 over the next 12 months, implying a downside risk of about 20 percent amid growing uncertainties over the company’s future.
Unlike IBM, Acer’s case proves that elephants can’t dance. The company has been slow to react to market trends and customer demand.
Without flexible strategies and smooth communications, big companies like Acer are simply unable to cater to customers’ ever-changing needs by producing the right products at the right time .
In short, Acer needs a miracle to make its restructuring plan a success.
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