Acer aims No. 3 spot

Baker Li

TAIPEI: Taiwan's Acer Inc. said on Monday that it aimed to become the world's third-largest PC vendor with a 10 percent share in three years as it tried to replicate its success in Europe in the U.S. and Chinese markets.

Acer, which unlike most Taiwan computer manufacturers sells under its own brand, forecast sales to grow 40-50 percent annually in the next three years, Acer Chairman JT Wang told reporters.

Laptops are expected to drive growth, as PC makers are benefiting from consumers taking advantage of low prices to replace desktop PCs with portables, incorporating the latest wireless technology.

Acer had hoped to become the world's third largest next year, but had to revise its target schedule after Chinese rival Lenovo Group bought International Business Machines Corp.'s PC unit.

"We understand we have been number one in Europe in the past three to four quarters. But we can't expect very strong growth (there) in the next several years," Wang told reporters, adding that Europe accounted for 60 percent of Acer's revenue.

"We need China and the U.S. markets," he said. China contributed 11 percent of revenue, the United States 8 percent, and the rest of the Asia Pacific region 13 percent, Wang said.

Acer's shares rose as much as 1.1 percent on Monday, outperforming the flat Taiwan market. The stock was up 0.81 percent at T$61.90 ((US$1 = T$33.0) at 0512 GMT.

Acer ranked fourth in the world in the second quarter, with a 4.4 percent market share, according to International Data Corp. Dell Inc. was first with 19 percent, Hewlett-Packard Co. second with 15.4 percent and Lenovo/IBM third with 7.5 percent.

Wang said a 1 percent market share translated to $2 billion in revenue, so that goal would bring sales to over $20 billion a year.

One analyst said Acer's market share target was ambitious but profitability was a bigger concern.

"The 10 percent is very aggressive. The growth of the top line is no problem, but in the longer term, ASP (average selling price) will continue to fall and we are still concerned about margins," said Daniel Chang, an analyst at Macquarie Research.

"It's a story about gaining market share," he said.

Revenue growth



Macquarie put Acer's operating margin at 2.5 percent this year and saw it remaining flat in 2006.

Wang said consolidated revenue this year would total about $9 billion, up 29 percent from last year's $7 billion and in line with analyst estimates, reiterating a forecast given earlier by other Acer officials.

Acer's PC business would contribute about $8 billion, he said. The firm also makes personal digital assistants, and flat-screen monitors and televisions.

Wang said notebook computer shipments in the first six months of 2005 were 89 percent higher than the corresponding period last year, while shipments of desktops computers rose 41 percent.

Acer's second-quarter profit more than doubled from a year ago to T$2.265 billion (US$69 million).

In contrast to Dell's direct sale model, Acer relies on distributors -- the main reason behind its success in Europe.

"Acer is 100 percent dedicated to the channel business model. We study and draw the draft pictures to meet market requirement. Suppliers like Quanta, Compal and Wistron make it happen because they have thousands of engineers," Wang said.

Like competitors in Japan and the United States, Taiwan's top PC company minimises costs by subcontracting manufacturing to firms like Quanta Computer Inc., Compal Electronics Inc. and Wistron Corp.