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Acer makes no money off $799 ultrabooks, plans seppuku plunge to $499 to achieve iPad price parity

Acer, Inc. (TPE:2353) has plunged in global sales market share and seen major leadership shakeup.  The company's new CEO JT Wang blamed the decline on his company's poor products, which he described as "cheap" pieces of electronics.  He vowed to make his company "more Apple-like", a tribute to Apple, Inc. (AAPL), the world's most valuable electronics company in terms of market capitalization.

Acer responded to this downturn by backing Intel Corp.'s (INTCultrabook push, unveiling designs like the S3 and the S5.  These ultrabooks have been very competitively priced -- the S3 starts at $799 USD/ €699.  But there's one minor hiccup -- according to Christoph Pohlmann, an Acer laptop team leader who spoke with The Verge, Acer makes no profit currently off its ultrabooks.

According to the interview, Acer does overall see a profit, as higher-spec’d models are profitable, while the entry-level design serves as a publicity tool.  In other words, Acer's current approach makes sense, though is slightly risky in relying on a certain amount of "break even" product.

But Mr. Pohlmann voiced strong doubts about Acer Global President Jianren Weng 2012 CeBIT promise (quoted by UDN), in which he said that Acer would be dropping the price of its ultrabooks to $499 USD by 2013 to match the price of Apple's iPad.

Acer v. iPad
Acer wants to sell its entry level ultrabooks at the same price as the iPad, taking a deep loss per unit. [Image Source: Acer (left); Apple (right)]

He said that Acer would have a near impossible time getting its ultrabooks bill-of-materials to $599/€499 in that timeframe, let alone $499/€399.  

In other words, Acer may be committing financial seppuku if Acer President Weng carries through with his deep discounting plan, in that Acer would be losing as much as $300 USD per laptop sold.  Investors should be very concerned about this development as it brings a huge risk of backfiring catastrophically.

There's a small chance the gambit could pay off, as it would surely score Acer a lot of customers, and perhaps drive some sales of its profitable specs.  However, the plan is also likely making other laptop makers nervous that customers are going to demand that they follow Acer in its "race to the bottom".

Intel disagrees with this strategy, seeing ultrabook laptops as value items.  Intel Europe's marketing manager Dave Rogers told The Verge, "How little it will cost is not really the question."

He points to efforts like Intel's touch screen hybrid laptop/tablet prototype that was shown at CES 2012 running Microsoft Corp.'s (MSFT) upcoming Metro UI-driven Windows 8.  In other words, Intel and Acer are going in opposite directions when it comes to ultrabooks -- Intel wants more expensive models that give value by adding new technologies, Acer is trying to offer cheaper models that stick to traditional designs.

The ideological difference could push Acer to Advanced Micro Devices, Inc. (AMD), whose ultrathin chip making philosophy is aimed at lower prices.  AMD hopes to have ultrathins at sub-$500 prices on the market this year.  It could also lead Acer to experiment with ARM chipmakers' designs.

Sources: The Verge [1], [2], UDN

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Acer is funny as hell
By retrospooty on 3/7/2012 12:46:44 PM , Rating: 4
They always come out with these lofty claims and bad ideas. Their products just dont warrant the hype. They are OK, but not at all special.

So they want to be more like Apple... So they are coming out with cheap products that lose money to gain marketshare. Wait, that is the opposite of Apple. Apple does high end products at a high price premium and doesnt really go after marketshare. They go for quality at a price premium.

Acer, you want to succeed, start with better products and build on that.

RE: Acer is funny as hell
By Samus on 3/7/2012 1:10:31 PM , Rating: 2
They are also notoriously unreliable and a PITA to work on. Ever tried replacing a LCD panel in a Timeline?

RE: Acer is funny as hell
By HrilL on 3/7/2012 1:08:06 PM , Rating: 1
I wouldn't say Apples products are truly high end. They are perceived as high end and they charge high prices but that doesn't make their products high end. I can polish a terd and charge $20 and if people buy it does that make my terd somehow high end?

We've had more Apple MacBook Pros fail then our Lenovo’s T410/420's Apple makes products that look good but their quality isn't that great at all.

RE: Acer is funny as hell
By Boze on 3/7/2012 1:24:48 PM , Rating: 3
You need to look at as a function of height.

If you're 8 foot tall and you're pooping out turds, I'd say that's pretty "high end".

RE: Acer is funny as hell
By apinkel on 3/7/12, Rating: 0
RE: Acer is funny as hell
By theapparition on 3/7/2012 2:20:04 PM , Rating: 3
While most of your statement is viewed properly, I take issue with your assertion that:

This means that you are paying a certain amount for customer service, top line performance , and style with the product.

Apple products have almost never been known for top line performance. Never do they have the latest graphics, latest CPUs and often they lag the industry with newer standards. That's not a direct criticism, because without the "latest and greatest" they still sell quite well. But the point is Apple's products rarely have top line performance.

Only recently can they claim that with their iPhone, and that's only for GPU operations. For CPU operations, the iPhone is still much slower than it's competition.

RE: Acer is funny as hell
By TakinYourPoints on 3/7/12, Rating: -1
RE: Acer is funny as hell
By MGSsancho on 3/7/2012 2:26:43 PM , Rating: 2
HP envy also has better sound (better physical drivers), better glass, made from magnesium/aluminum vs ABS, back lit keyboard and those service amenities you mentioned.

RE: Acer is funny as hell
By Samus on 3/7/2012 3:26:47 PM , Rating: 3
Apple products are exceptionally well built out of mediocre components. They are styled to appear to a particular audience, which appearantly happens to be the majority of consumers. I appriciate Apple's 'quality' and support, as erratic as it may be.

They never recalled or even offered a discount to fix the notorious iMac panels that formed dozens of lines just out of warrant, as they never offered a true fix for the original iPhone 4. However, they support their MacBooks well back through the plastic "Crackbooks" by offered free replacement of the inner shells, which is pretty costly, especially in labor, and purely cosmetic.

It's fascinating they recall cosmetic problems, but never functional ones.

RE: Acer is funny as hell
By seamonkey79 on 3/7/2012 9:25:01 PM , Rating: 2
Cosmetic issues are not the fault of Apple, Inc.

Cosmetic issues are caused by the plebes that Apple, Inc. allows to purchase products. Once it's out of the warehouse, it might have problems with the cosmetic functions, and that is where Apple, Inc.'s biggest selling point is, so of course they'll fix it. If you're seen using a Macbook with cracked plastic, how likely is someone else to say 'that looks like a well built and functional computer, I'm going to get one!'

However, no Apple computer or device has ever actually had a hardware flaw. You either hold it wrong or it is a feature to keep you safe from the world that is only out to get you because you are far more sophisticated than it.

RE: Acer is funny as hell
By retrospooty on 3/7/2012 2:17:14 PM , Rating: 2
"Apple MacBook Pros fail then our Lenovo’s T410/420's"

That is because Lenovo is the best quality laptops in the industry, hands down.

My point remains. Apple's stuff isnt bargain basement crap. They generally have a high build qualiy and high end feature set. Dont flame away, I said "generally" - Not necessarily every product. My point is that Acer is the exact opposite of Apple. And making low end products and lowering the cost to sell at a loss to gain marketshare is the opposite of Apple strategy. Its like saying "I am going to lower taxes, cut spending, remove buracracy and eliminate several un-needed govt. agencies in my quest to become a fiscal liberal"... It just makes no sense.

RE: Acer is funny as hell
By Samus on 3/7/2012 3:38:20 PM , Rating: 3
I agree. There is no comparison to a Thinkpad T-series. Although I've always personally thought Thinkpad's are beautiful, you can't get them in White or silver and the utilitarian look doesn't appeal to the average person who just wants a average device; Apple. For twice as much as a Thinkpad, of course.

RE: Acer is funny as hell
By Omega215D on 3/7/2012 4:34:13 PM , Rating: 2
The guy that designed the Tizio lamp designed the ThinkPad and I think one is on display at MoMa or Guggenheim (not too bothered to look it up).

It's a great understated and durable designed focused on business users. My 2007 Thinkpad T60P is still kicking along while my 2007 white MacBook kicked the bucket a year and a half ago.

RE: Acer is funny as hell
By retrospooty on 3/7/2012 4:53:13 PM , Rating: 2
The replacement models, the T510 and T520 are even more solid. Not as time tested yet, but the build, the hinges, latches everything totally solid. A noticeable improvement over the already solid T60/T61/T500 design. Even just the LCD hing, you move it once and feel like it will last forever.

RE: Acer is funny as hell
By UNHchabo on 3/7/2012 4:59:45 PM , Rating: 2
I didn't think the T510/520 replaced the T410/420; I thought it was just a difference in screen size. 14" for the T410, and 15" for the T510.

RE: Acer is funny as hell
By retrospooty on 3/7/2012 5:17:42 PM , Rating: 2
Sort of . The T60/T61 were 14 and 15 I think... then the next gen changed to T400 for 14 and T500 for 15 inchers. Then T410,T420 and T510,T520. But it is basically the same save the screen size.

RE: Acer is funny as hell
By Omega215D on 3/7/2012 11:45:30 PM , Rating: 2
Unfortunately I find the 4:3 aspect ratio to be more useful than the new Widescreen ThinkPads. At least the matte screens are still an option.

RE: Acer is funny as hell
By TakinYourPoints on 3/7/2012 5:33:22 PM , Rating: 2
They're awesome, the only laptops aside from MBPs that I recommend. The x220 with IPS display upgrade, so nice.

RE: Acer is funny as hell
By Omega215D on 3/7/2012 11:43:50 PM , Rating: 2
I do feel they could make the screen a tad brighter though. Maybe I'm just too used to my desktop IPS monitor brightness (after calibration).

I would rather use the larger ThinkPads for the swappable bays so I can choose between batteries or drives.

RE: Acer is funny as hell
By iamnoone on 3/8/2012 11:11:54 AM , Rating: 2
I bought one for my wife last XMas. It's a super sweet 'top--light, FAST and stays cool to the touch. The thing that always strikes me is the overall feeling of quality--it's not flashy but man is it good stuff!

I really considered an Ultrabook as the price was about the same, but the wife is pretty hard on her laptops. A 3-foot drop from the arm of the couch to hardwood has killed a couple of them now. For daily use (1-2 hours while watching TV), it only has to be charged once/week, so we don't have the cord sitting out all the time.

The IPS screen was a no brainer and is worth every penny and more. I plan to install an mSATA SSD sometime in the next year for the boot device then use the existing 320GB for backups.

RE: Acer is funny as hell
By HrilL on 3/7/2012 5:21:13 PM , Rating: 2
Its like saying "I am going to lower taxes, cut spending, remove buracracy and eliminate several un-needed govt. agencies in my quest to become a fiscal liberal"... It just makes no sense.

Actually does make sense though... We never used to have an income tax and the government never used to be in debt either. This is something that we could go back to just too many people want free hand outs. We also had sound money that isn't printed out of thin air about 100 years ago.

Your reference to Ron Paul is quite insulting as you compare his views that have history and economic fact backing them. While Acer is a low end computer company with no sound economic guidance.

RE: Acer is funny as hell
By seamonkey79 on 3/7/2012 9:30:28 PM , Rating: 2
The federal government has been in debt since before the signing of the Declaration of Independence. The difference is that the federal government was borrowing from individuals with ready funds rather than essentially borrowing from itself and future earnings. The original government borrowed from funds that existed in circulation already, instead of printing new funds and promising that one day they would be paid back.

You are absolutely correct, though, that the amount of debt has been increasing at a far increased rate since the income tax was instituted, but we cannot completely ignore the costs of the Revolutionary War, War of 1815, Civil War, and the Spanish American War that were covered by the federal government (or its precursor) borrowing funds.

RE: Acer is funny as hell
By retrospooty on 3/8/2012 7:01:11 AM , Rating: 2
"Your reference to Ron Paul is quite insulting as you compare his views that have history and economic fact backing them. "

I wasn't referring to Ron Paul at all, just making an analogy at the expense of the gov't and the 50+ year spending spree they have been on.

RE: Acer is funny as hell
By TakinYourPoints on 3/7/2012 3:37:46 PM , Rating: 2
Yeah, I don't know what they're thinking. Taking a massive loss on products so that they can possibly sell more, and if the strategy is successful they will lose even more money in the process.

This isn't like a game console where they can hope to make the initial loss back on selling games and accessories. All Acer has is the initial sale and that's it. It makes no sense. They should stick with cheap hardware if they want to keep selling products in that price range.

RE: Acer is funny as hell
By retrospooty on 3/7/12, Rating: 0
RE: Acer is funny as hell
By The Raven on 3/8/2012 7:07:25 PM , Rating: 2
DT should be ashamed! I find the usage of such terms to be offensive! Acer is a Taiwanese company. But oh since they are Asian...Japanese, Taiwanese what's the difference?! Lets eat some chop suey while we are at it. Miso sorry. 'Tis the season to be jarry, Fa ra ra ra ra ra ra ra ra!!


Acer = crap
By vision33r on 3/7/2012 8:41:02 PM , Rating: 2
They will do what HP did is to get cheap laptops out on the market and then rape people on repairs when those things break and you need to pay another $300 to fix those overheated mobos.

If you have any problem with Apple goods as long as you are in warranty, they will fix it right.

RE: Acer = crap
By semo on 3/8/2012 4:02:21 AM , Rating: 2
Anything that is in warranty will be fixed right. It's the law. Out of warranty Apple products are expensive to repair as well

RE: Acer = crap
By abhaxus on 3/9/2012 2:28:00 AM , Rating: 2
Acer has a pretty obvious policy of not honoring warranties. Until you've owned an Acer (or Gateway) product and had to call in for service, and being told your completely legitimate serial number is unrecognized, you don't know what the OP is talking about.

By semo on 3/8/2012 3:10:18 AM , Rating: 2
But how easy is it to open these and upgrade them with an SSD? I imagine not very + the warrinty will be voided

By iamnoone on 3/8/2012 10:46:13 AM , Rating: 2
'Ultrabook' = SSD; it's one of the specs to be in the 'ultrabook' class.

By semo on 3/8/2012 12:37:13 PM , Rating: 2
I know that. That's why I checked the models mentioned in the article and found that most of them have HDDs.

Good for me
By tayb on 3/7/2012 1:01:59 PM , Rating: 2
If they drop the prices of those ultrabooks to $499 that is good for me. I'll buy one.

RE: Good for me
By bupkus on 3/7/2012 1:06:11 PM , Rating: 2
Probably me too, if it really is quality

No, no, no, go back to basics acer!
By Meaker10 on 3/7/2012 1:20:43 PM , Rating: 2
The reasons for market share going down are as follows:

1) You stopped putting mid range graphics cards in your low mid range machines. Where are the £600-800 machines shipping with GDDR5 GTX560Ms?

2) You scrapped some of your most successful machines (3820TG with 13" screen, decent graphics and dual fan design)

3) For the enthusiasts you stopped using MXM graphics cards.

By Visual on 3/9/2012 8:19:05 AM , Rating: 2
Add to that list giving up to develop the tablets that they had back when ipad was just a hobby for some apple lab geek.
I mean 1420p/1820pt etc.

They never actually delivered them for sale in my region for some reason (Eastern Europe) despite me wanting one so much...

Later on they could have had such awesome evolution, i.e. wacom digitizers which i wouldn't mind paying extra for, with sandi bridge graphics being able to play a lot of decent 3d games, etc.

Even today there are almost no options in this segment that are worth a mention.

Wrong product
By Slaimus on 3/7/2012 12:30:08 PM , Rating: 2
How about improving your tablet products instead? I have not seen an Acer tablet with an IPS or OLED screen yet.

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