Acer Returns to Profit, Pushes Revised Strategy

by Brandy Betz | February 21, 2012 5:34 pm

Computer manufacturer Acer reported fourth-quarter earnings last week that marked a return to profitability. The Taiwan-based company fell from second to fourth place in the market last year, and restructuring efforts are underway to bridge losses. The road ahead is paved with rebranding efforts, an increased focus on Ultrabooks, and new product offerings aimed at keeping up with the competition.

Acer’s reported a fourth-quarter net income of $2.5 million ($75 million New Taiwan Dollars), down from $131.8 million the previous year. It was an improvement over the previous two quarters of losses but fell well below Bloomberg analyst estimates of $6 million.

Acer faced difficult challenges over the past year, and the company is still trying to adjust to them. The company’s former president and chief executive officer, Gianfranco Lanci, left over internal disputes and later moved over to PC maker Lenovo (PINK:LNVGY[1]), prompting Acer to file a lawsuit alleging non-compete violations. The fall flooding in Thailand created a hard drive shortage, driving up production costs while limiting supply. And continued economic strife in Europe, a market that accounts for one-third of Acer’s revenue, helped slash sales nearly in half in the fourth quarter.

Attempting a major play on the Ultrabook market

A robust and updated offering of products could’ve helped offset these blows. Acer acknowledges that it failed to react to market changes and claims it has learned from that mistake. Oliver Ahrens, president of European operations, told the Financial Times: “Our strategy is now adjusted to the new circumstances. We have changed the way we trace market growth and keep track of our inventory.”

Acer is fighting back against European losses with a new marketing initiative that includes a budget doubled over that of previous campaigns. The company is shifting focus from its netbooks to Ultrabooks, lightweight laptops meant to compete with products such as Apple’s (NASDAQ:AAPL[2]) MacBook Air.  The company’s first Ultrabook, the Aspire S3, launched last September. Acer presented the Aspire S5, billed as the world’s thinnest Ultrabook, at the International Consumer Electronics Show last month.

In addition, the company will present a new smartphone offering at the Mobile World Congress taking place next week in Spain. The Acer CloudMobile phone has already won an International Forum design award and surprisingly positive press despite a lack of specification details. The phone will run the updated Android 4.0 operating system and is set for a third-quarter launch.

The relative success of Acer’s attempt to climb back up the market will depend on its ability to keep up with direct competitors like Lenovo while also keeping an eye on industry game changers such as Apple and Google (NASDAQ:GOOG[3]). The company knows where it went wrong and is making adjustments. Its performance this year could indicate whether its current strategy was implemented too late.


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