Acer Weaknesses

genus genus genus Acer closes in on dingles No. 2 PC be By Bruce Einhorn, BusinessWeek Tuesday, January 20, 2009 1133 AM Just a few eld ago there was a physique out pecking order in the PC industry, with dell at the front and Acer agency back in the queue. dingle and its U. S. check Hewlett-Packard were the clear champions, selling far much desktops and laptops than anyone else. Meanwhile, little Acer, a Formosan club that had tried and failed in the 1990s to blot the U. S. marketplace, was an also-ran, with worldwide market sh ar in the single digits. As recently as 2003, Acer ranked just seventh in sales around the world.Lately, though, the Taiwanese amaze been pushing their way always closer to the front of the line. Market-share numbers publish on Jan. 14 by look for level International Data envision HP is still on top, with 19. 6 pct of all PC shipments, and dell is No. 2. But Michael Dell has agreement to worry. While Dell shipments fell 6. 3 percent in the fourth quarter, Acers jumped 25. 3 percent. That not only puts the Taiwanese caller solidly in the No. 3 come in worldwide, it puts Acer less than two percentage points extraneous from Dell, with 11. 8 percent share to Dells 13. 7 percent. And Acer is believably to keep on closing the gap, regu belated analysts. In the next two or three quarters, you will probably checker Acer surpass Dell, predicts Daniel Chang, an analyst in Taipei with Macquarie. Gateway Was an Opening What accounts for Acers uprising? The play along is benefiting from its US$710 zillion bribe of Gateway, announced in August 2007. At the time of the deal, Gateway was the trine-biggest PC soft touch in the United States, and the purchase has helped Acer gain ground in a market that had long stymied the Taiwanese party. presently after that deal, Acer followed up with the achievement of the Packard-Bell brand, popular in parts of Europe. tally to the latest IDC numbers, Acer now ranks third in the United States, with shipments of 2 million computers in the fourth quarter. That puts Acer forrad of Apple and behind only Dell and HP. Acer declined to make any exe deleteives operable for comment. Even more crucial for Acers market-share fig out has been its focus on the hottest new instalment in the computer industry, so-called netbooks. These pint-sizing laptops are light, simple computers that typically woo no more than US$ calciferol and are based on a design that Intel first developed for schoolchildren in emerging markets.The first to realize that the netbook could make out a crossover hit in wealthier countries was Acers Taiwanese rival Asustek Computer, which launched its Eee PC in late 2007. Acer quickly followed, and it in brief grabbed the lead. Meanwhile, Dell, HP, and Lenovo hesitated before launching netbooks of their own. They didnt start producing the mini-notebooks until late in the game, says Robert Murtagh, worldwide PC tracker seek analyst with IDC in San Mateo, Calif. That has given Acer a strategic advantage. Low-Price TrendWith recession-weary consumers hunt club for bargains, Acers focus on inexpensive netbooksand its old role as a lower-cost resource to the likes of Dell and HPhave helped the company boost shipments. And while the competition in the mini-notebook business is bound to get tougher in 2009, Acers head start should give it an important edge. We believe Acer will unfold to be the winner in the low-price geld and the netbook market, wrote mention Suisse analysts Robert Cheng and Jill Su in a Jan. 13 report.Moreover, one of Acers weaknesses, its relatively poor position among corporate customers in the United States, has meant the company has suffered less than Dell and Lenovo, both of which have relied more on sales to businesses. accord to IDC, Lenovo shipments fell 4. 8 percent in the fourth quarter the company on Jan. 8 announced plans to lay off-key 2,500 employees, 11 percent of its workforce. Tracy Tsai, an analyst in Taipei with market research firm Gartner, says Acer wont need to make the sort of layoffs that others have. Acer has real tight trouble on its costs, she says, and it has just 6,000 workers. The smaller size f Acer puts it in a better position. Still, Acer faces some headwinds. Credit Suisse estimates 2008 earnings rose 7 percent, to US$353 million, on sales of US$16. 5 billion. But this year profits are likely to fall 7. 5 percent, on a 6 percent disgorge in sales, the bank says. Macqauries Chang expects a slowdown, too, and he warns that Acers focus on building market share distracts the company from a more important statistic earnings. As competition heats up further in netbooks, he says, Acer will face pressure to cut prices even more, drawing would-be customers away from its laptops and hurting Acers bottom line. Everybodys netbook looks very alike(p) now, says Chang, so companies selling them can contend only on price. For its part, Dell argues again st nonrecreational too much attention to market-share rankings. When we report our Q3 financial results, we said our focus in this challenging environment wasand continues to beon positioning Dell for long-term profitable growth by improving our engagement and enhancing our leading product and services portfolio, Dell spokesman David Frink says via email. Were in the midst of that now.