Acer’s Everywhere in the PC World

Monday, June 29th, 2009

Acer’s everywhere in the PC world, with 11.6 percent of the market to Dell’s 13.6 percent:

For close to 15 years, Acer suffered from a split personality. One part of the company built computers for other PC sellers that would then put their labels on the machines. Another part of Acer sold very similar computers under the company’s own brand.

The arrangement created obvious conflicts, Acer executives say, with the group responsible for the Acer-branded products competing against the customers of the manufacturing arm.

In 2000, Acer began cleaving off its manufacturing division. A year later it formed an independent company called Wistron to handle these operations. A smaller, nimbler Acer emerged, outfitted with a new logo and lofty, global aspirations.

With a clean slate, Acer made what looked like counterintuitive decisions. It decided to focus on laptops for consumers, and to sell them through partners and retailers, avoiding any kind of direct sales.

This approach placed Acer on a distinctly opposite path from Dell, which was the PC industry’s major success story in 2000. Dell had surged past rivals like Compaq, I.B.M. and H.P. through an ultra-lean direct sales model that hinged to a large degree on shipping desktop computers to big businesses.

In the subsequent years, however, computer retailing shifted in favor of Acer. Consumers now buy more computers than businesses do, and these buyers tend to prefer laptops to desktops. The advantages that Dell once gained by mixing and matching components for customers at its factories have faded as consumers have flocked to stores to buy preconfigured computers.

“When we split, we thought that if the PC is going to become more of a commodity, consumers will end up as the largest part of the business,” says Mr. Lanci, who became chief executive last year. “Going direct didn’t look like the right model for addressing that. After eight or nine years, it looks like we made a very good decision.”
Last year, Acer relied on about 6,000 employees to hit $16.6 billion in revenue and a profit of $358 million. While the company probably produces more revenue per employee than its rivals, it does so on the back of less profitable products. Its operating margin of 2 percent is about half that of H.P. and Dell, placing it in a profit category below even some retailers, said A. M. Sacconaghi, a securities analyst at Sanford C. Bernstein & Company.
Over the last two years, it has acquired brands like eMachines, Gateway and Packard Bell. It pitches eMachines as its most affordable brand, while Acer-branded products cater to the mainstream. The Gateway moniker covers more expensive, flashier computers in the United States, while the Packard Bell brand serves the same purpose in Europe.

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