Acer, at 30, aims to be No. 3

Acer Inc. marks its 30th year this month with a wish to become the world’s third largest PC company by the end of next year.

At No. 4 today, Acer is optimistic its strong channel business model, its new desktop line with smaller form factor, and its new focus on mobility, enterprise and "convergency" solutions for digital home, will improve its market standing.

As of the last quarter, global market rankings show HP with 16.3 percent of the PC market, followed by Dell and Lenovo with 16.1 percent and 7.5 percent, respectively. Acer accounts for 5.9 percent of the market, while Toshiba trails at 4.3 percent.

A particularly good perfor-mance for the same period was recorded by Acer in Europe, Middle East and Asia (EMEA) where it hit 11.2 percent to become the No. 2 brand.

The Philippines, in particular, where Acer has a three-year old subsidiary, appears to have taken a liking to Acer notebooks enough to help it grab the plum No. 1 slot.

Based on the IDC Asia-Pacific quarterly PC tracker report for the second quarter, Acer lorded over the other top PC brands with its 21 percent share of the Philippine notebook market during the first six months of 2006. This translates to unit shipments of 9,666 Acer notebooks with a total value of about $14.6 million, the IDC report shows.

Worldwide, Acer presently has over 11 percent share of the notebook market and 10 percent share of the PC market. This, along with Acer’s business longevity, gives the company reasons to be euphoric in celebrating 30 years.

But at the same time, its key executives acknowledge that certain industry developments could affect Acer’s growth prospects. Among these, further industry consolidation led by key components and suppliers appears to get the most attention from Acer’s chairman J.T. Wang and Acer president Gianfranco Lanci.

Wang says Acer is ready to accommodate the changes a consolidation would bring because he is confident Acer could still be the "best of choice" for original device or equipment manufacturers to partner with.

"Even when ODMs and key component suppliers and channels consolidate, they will still need a brand partner to complete their offerings. We can be that given our attractive product and cost offerings, then 2007 will still be great (for us)," says Wang in his presentation before channels, media and other guests during Acer’s two-day anniversary celebration in Taipei last week.

The two top executives also weigh up the effects of Microsoft’s yet to be released new operating system as something good for the market as long as it doesn’t get delayed further.

"It’s important that Vista is not delayed anymore," says Lanci who didn’t hide his pessimism. "We hope it will be in January although frankly speaking, I think it may not be available by then. It’s important that Microsoft avoids further delays as in the past as it affects customers’ buying decisions."

Wang, on the other hand, is optimistic that once Vista becomes available it will ease a lot of concern and hesitation on the part of customers in purchasing new PCs and drive the sales momentum next year.

With all the possible scenarios that could play out next year, Lanci says growth and profitability and the ability to have economies of scale are what players would continue to guard the most.

"One needs at least 10 percent market share to survive," he says, adding that while the notebook market is growing, the PC’s is declining.

Wang admits that "selling desktops has become trouble-some," but quickly adds that he strongly believes "that there are still a lot of opportunities in this area."

So, for Acer to be No. 3, Wang says they will also continue to focus heavily on the company’s global brand marketing compe-tence. Lanci, for his part, says that instead of buying companies, Acer will focus on becoming No. 3 by working on its organic growth and targeting markets with huge populations such as Russia, India and China as well as emerging markets that include the Philippines.

Channels

Acer officials also took its anniversary celebration to highlight the validity of its channel business model as superior to the direct selling approach of its competitors. Wang notes that the channel business model has proven to be the mainstream model in the PC industry today and that Acer will continue to implement this business model, erasing all possibility of the company going direct.

He recalls how five years ago when the direct business model gained followers, Acer stuck to its channel business model. Lately, however, saw a shift in favor of the channel business model, prompting Wang to stress how Acer’s business direction has been correct all along.

"Acer’s channel business model worked for the last five years and makes for future successes... Acer contributed strategically in making the channel business model to gain more share and eventually to get the dominant industry support. Even in the US, over 60 percent of consumers now prefer to buy their PCs and notebooks at retail channels located in malls instead of buying online... We’re convinced that Acer is more competitive by having partners to penetrate markets and countries one by one while also giving us the advantage of scalability. We do not go direct," Wang says.

In the Philippines, Acer has two major channel partners, which tap a network of about 500 resellers.

Innovations

For three decades now, Acer has never stopped to innovate as fast as the IT industry to add value to its brand, says Lanci. By next year, he announces that many of their innovations will be around mobility, solutions for small and medium enterprises (SMEs), and products featuring the convergence of IT and consumer/home electronics.

"Application-based products, new form factors across all segments and connectivity will become the key differentiators... We don’t want to sell technology for the sake of technology. Technology solutions that can fix customers’ problems are what matters," Lanci emphasizes.

Acer, Lanci adds, will keep developing PCs that are small but highly secure and manage-able with the potential of becoming the standard design for SMEs. In addition, it will pursue a "convergency" strategy that includes commercial PCs, PDAs, notebooks and smart-phones for markets with both the bandwidth and financial resour-ces.

This strategy will also include Acer’s planned digital home products integrating PC and TV technologies to allow people to exchange content from the Web between the two media.

Lanci, however, declines to give specifics on Acer’s digital home strategy, except to say that it’s something the market has not yet seen despite what consumer electronics have exhibited in the past.

Wang says Acer’s digital home products will be the company’s "star products" within the next few years. "They will become part of our main-stream digital office/home offerings with high-quality premium service and mobility features," he adds.

Low-cost

Acer, which historically has been a price competitive player, considers cost essential if they are to address the requirements of low-income segments. However, both Wang and Lanci stress that cost should not compromise quality and usability

"The low-income markets also want the best and most updated computers. If key component manufacturers want to seriously address this market’s needs, Acer will be part of it. We make business where it makes sense and not out of charity consider-ations," says Wang.

On that note, Lanci critiques the $100 sub-notebook being developed by engineers at the Massachusetts Institute of Technology as something lacking in substance to seriously break the barrier between technology and people.

"In my opinion, what the low-income market needs are functionalities that are low-cost but are comparable to what we use today and not something in between. We need to work with component manufacturers to provide something that will give them functional solutions," explains Lanci.

Meanwhile, Acer is proud to have outlived many of the PC companies it competed with 30 years ago, which included companies such as Wang, Commodore and Tandem, to name a few.

Being No. 4 today is a big step from previous years, says Lanci, to which Wang adds that to be No. 3 is a safe target for Acer at least for another decade.