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Company hopes that ultrabooks are the answer to its sales woes

Taiwan's Acer Inc. (TPE:2353) is sick and tired of making "cheap" products.  It lusts for the kind sleek designs that highly profitable American computermaker Apple, Inc. (AAPL) produces.

Acer CEO J.T. Wang was blunt when he remarked, "We will shift our strategy to improving profitability from pursuing market share blindly with cheap and unprofitable products."

The candid rhetoric is a sharp departure from that of company founder Stan Shih who in 2010 fielded such wild opinions as stating that Acer's products were so cheap they would put Dell, Inc. (DELL) and Hewlett-Packard Comp. (HPQ) out of business in 20 years and that Apple was a "mutant virus" that would go the way of "Betamax".  At the time Acer had just stolen the number two spot in global sales from Dell.

However, since then it's been all downhill for the firm.  It began to post losses, its CEO was forced to resign, and suddenly "cheap" was perceived in a whole new light.  Suddenly Acer began to aspire to be more like Apple -- a premium vendor with large margins.

In 2011, the situation has progressively deteriorated for Acer, despite its change in attitude.  Tablet sales passed netbook sales -- Acer's traditional sales driver.  Acer had prepared for this launching an Android tablet, but this first crack at the tablet market proved a relative flop, forcing it to cut sales estimates almost in half.

Recent estimates on global PC sales show Acer shedding nearly 20 percent of its U.S. and 10 percent of its global market share, falling to fifth place in the U.S. and fourth place globally in PC sales (excluding tablets).

Acer feels that by focusing on good battery life, a thin design, and light weight it will be able to return to sales success.  The culmination of all those characteristics is "ultrabook" a class of PCs first introduced by HP's "Envy" and Apple's MacBook Air luxury designs back in 2008.  Officially the term "ultrabook" comes from chipmaker Intel Corp. (INTC) and has a strict set of hardware quality requirements for use.  

Mr. Wang comments, "Selling more ultrabooks will also help improve our profit margins as they command higher prices."

Acer's first ultrabook, the Aspire S3-951, went on sale on Oct. 10, 2011.  The 13-inch design is remarkably similar in look to the MacBook Air, complete with a thin metal shell case.  It's currently retailing for as low as $870 USD from Amazon.com, Inc. (AMZN), compared $1,290 USD for the cheapest 13-inch MacBook Air.
Acer Aspire S3-951

If all goes according to plan, Acer hopes to halt the losses and grow 10 percent in 2012.  But to do that, it argues, it must stop selling "cheap" junk.

Source: WSJ



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RE: Another Brand
By TheRequiem on 12/8/2011 6:36:24 PM , Rating: 2
I'm not sure about this, look at how bad Apple's reputation was before they came back making premium products. I for one, think Acer has a nice kick to it's name. I think if they dramatically revamped their lineup, it's possible they could re-design their brand name. Many companies have done this. Look at Sprint, as little as three years ago, they were looked at as the worst mobile company in the U.S. and now they three years later, they've been taunting Verizon's customer service daily and with a new network in the works, it looks liek their brand is becoming a higher value. Not impossible.


RE: Another Brand
By rbuszka on 12/9/2011 1:33:23 PM , Rating: 2
The problem is that the corporate culture at Acer is wildly different from Apple and is more like the mundane PC makers like HP and Dell. You don't have a person at the top making design decisions and pouring his personal passion into every decision. Instead you've got a bunch of MBAs with no knowledge of the customer's desires (because that's for the little people to focus on), and they only focus on profitability through volume and cost-cutting, so you've got a recipe for falling deeper into unfocused confusion and a race to the bottom of the quality totem pole, not a more coherent brand. To build a high-end brand, you can't cheapen it one iota with 'low-end' products. If the customer's brand recognition of Acer isn't focused on high-end products, they will look for a brand with a more visible high-end focus (like Apple).

Sadly, I see Apple going this route more and more already as Steve Jobs has been gone, because he had passion and leadership abilities. I don't think Tim Cook will be able to lead as effectively as Steve Jobs, and while he may have passion and design sense, he won't have the 'my way or the highway' attitude that Steve brought to his management style, and his input will eventually be overwhelmed by the cacaphony of MBAs and gradually silenced, rather than being the dominant voice. I honestly believe the iPhone 4S will be the last 'insanely great' Apple product, and the company will gradually squander its reputation on increasingly mediocre products until the company eventually fails. At the first sign of a downward trend in Apple stock, sell your shares. It will be a race to get out.


"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer














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