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Taiwanese computer maker, once a star, has fallen on dark days

Acer, Inc. (TPE:2353) was a shining star of the netbook era, but the Taiwanese company enjoyed a tepid 2011 as the ultra-mobile consumer electronics market shifted towards tablets.  Unable to sell users' on the merits of the Iconia line of tablets, Acer tried to sacrifice its bottom line for sales, raising product quality at the expense of margins.  This year has proved more of the same -- while Acer has offered compelling product, it continues to languish under poor margins and large losses.

The Asian OEM's build quality push has allowed it to maintain anemic growth in the face of the netbook flop, even as rivals like Dell, Inc. (DELL) and Hewlett-Packard Comp. (HPQ) stumbled.  But it wasn't enough to allow Acer to keep pace with regional rivals like Lenovo Group, Ltd. (HKG:0992) and ASUSTek Computer, Inc. (TPE:2357) who posted large double-digit growth numbers.

In the third calendar quarter, Acer continued to exhibit poor results, earning a weak T$68M ($2.32M USD) versus the analyst consensus of T$756M ($25.8M USD).

The root cause was interestingly not the past source of issues -- netbook declines and margin struggles.  Rather, the company reportedly missed its targets as it was forced to pay a 34 percent effective tax rate, versus its expected 20 percent rate.  Acer also reportedly lost T$100M due to currency fluctuations (forex/"foreign exchange").

Acer sign
[Image Source: Boy Genius Report]

The big picture appears to be that Acer has reversed its troubling losses of last year, but is facing new fires, even as it works to put out those that were previously plaguing it.

Acer's Q3 revenue was T$104.4B USD ($3.57B USD), up more than 11 percent from a year ago.  But on a 9-month basis Acer's revenue has fallen roughly 5.7 percent from a year ago.

Assuming that Acer is able to get a grip on its new concerns -- tax rates and currency issues -- the holiday season should prove a key test for Acer.  The OEM has the opportunity to restore some of its luster by shining in Windows 8 device sales.  But if its critical decisions -- such as the choice to forgo Windows RT (ARM) product -- backfire and sales prove weak, Acer could see its reputation further marred.

Source: Reuters

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RE: This is another one of those...
By Samus on 10/23/2012 1:54:47 AM , Rating: 2
I gotta disagree. I had a client in 2003 purchase a bunch of Acer equipment because their sales guy calculated it was the best deal. It was like 6 laptops and 8 desktops. They were all Athlon 64's or Semprons because at the time the alternative was a Pentium 4, but that's were the positives end.

The laptops were plastic junk. Two had broken screens in the first year because the shell was flexible and fragile. Nobody liked the keyboards. They were "bouncy" and "wavey" according to numerous complains from employees. They began to overheat and fail by the second year. One had a warped fan that couldn't even spin because it was stuck. The battery life was also terrible. None of the machines could run 2 hours on a charge, even from day one.

The desktops were a complete disaster (yes, worse than the above) and amazingly the same models are still in production TODAY as the Veriton "L"

Those things are total crap. The Athlon 64 models, even know they were low power (35-watt?) were constant headaches. The hard disk mounted directly on top of the heatsink, so they had constant hard disk failures, a mix of controller failures and click of death failures. They were also stupidly loud when the CPU was working. During a flash animation or anything CPU intensive, the fans were so loud it was ear piercing. The slot load drives jammed. The power supplies (external 120 watt) were garbage and got super hot: two of those failed.

I could write a book on how terrible these "business" machines were. They all looked pretty and didn't cost very much, but the $31,000 in consulting fees paid out to have them constantly serviced and repaired over two years would have paid for them nearly 5 times over.

We replaced virtually all of the Acer crap by 2006 with Thinkpad X60's and Thinkcentre A52's. They still have many of these TODAY, 6 years later.

The sales guy/accountant who was responsible the Acer debacle was let go in 2007, not directly because of the IT situation he was directly responsible for, but because he had a habit of making the same bad decisions that people who are synonymous with buying Acer products are accustomed.

Acer, you won't be missed. The Timeline X was simply a mistake. You got it right once, but you need to get it right every time to make it in this business.

Lenovo is systematically toppling their competitors with quality and price. Once they get their distribution network built up, they will be almost untouchable until someone better comes along to dethrone them.

