It’s been a rough couple of years for Acer – to put it mildly. The Taiwanese PC maker, after rising to lofty peaks in market share with large double digit growth, has been shedding that share with large double digit losses. Now, however, with a new management team, fresh off internal reforms, and helped by a rising PC market instead of being hurt by a plunging one, the company has just posted positive numbers that took analysts by surprise. And while their latest product announcement – new 17 inch commercial notebooks – is very much a niche play, it is a space where Acer has done surprisingly well.
On Thursday, Acer reported a net profit of Tw$485 million ($USD 16.2 million) for the second quarter ending in June. That’s a jump from a flat Q1 (a profit of Tw$1 million) and a quantum leap over a loss of Tw$343 million in the year-ago quarter. Revenues in Q2 were down 9% over last year – paralleling a 7.0% drop in shipments Gartner reported earlier. However, in a positive sign, revenues were up 6% from Q1, to Tw$81.34 billion.
“We had sequential quarter over quarter growth, and it’s the first time in a year and a half we have done that,” said Gregg Prendergast, VP for Commercial Sales for Acer America. “It’s been a tough business in retail, with significant competition on both top line and margins, with new vendors like Microsoft entering the space, making the rest of the pie smaller, and with tablets slowing down, unless you are Apple.”
Prendergast acknowledged that Acer’s business model had left it vulnerable to a successful counterattack from competitors, so that the slowdown hurt Acer worse than others.
“Our strategy for seven or eight years was an everyday value price play, and we undercut the market and caught it flat footed,” he said. “Our competitors figured out there are ways to attack that, however. HP, Lenovo and Dell matched us on some of the opening price points. They would lose money on their low end SKUs, break even on the middle SKUs and make money on the high end ones. Acer wasn’t perceived as high end, so we didn’t get profitable placement there. In addition, when the tablet explosion took place, we had been in and out of the space, so we didn’t have relevant market share, and that’s not a good place to be.”
Prendergast noted that Acer’s channel business, which had never been pounded like the retail, has been leading its rebound.
“We’ve had great growth in the channel the last couple years, with close to 50% growth in the U.S.,” he said. “It has had a halo effect, and has helped us a lot while retail has been tough to make money in.”
Prendergast said their channel has remained loyal despite Acer’s problems because Acer doesn’t compete with them, and does other things that help them make money.
“We have no direct sale model, unlike the other PC vendors, so partners trust us and embrace us, and we have a lot who lead with us,” he said. “We have good relationships with direct marketers and thousands of smaller VARs, including about 1100 resellers in our Reseller Affinity Program. We offer a 6% rebate for commercial products, so they can make some money. And our free service and support is U.S. based, with the call center in Texas, and that helps a lot in the SMB and education markets.”
The new products Acer is announcing are two TravelMate P276 Series notebooks with large 17.3-inch displays and discrete graphics for professionals. They are designed for commercial users requiring large screens as well as cutting-edge power and performance in a mobile form factor.
“Acer has always done very well in the 17 inch space, even in models with lower end processors,” Prendergast said. “There is not as much competition in the 17 inch space, for whatever reason.”
Neither of these has a lower end processor. The Acer TravelMate P276-MG-75N3 has a 4th generation Intel Core i7-4510U processor (4MB L3 cache, 2.0GHz with TurboBoost up to 3.1GHz) and 16GB DDR3L SDRAM. It is targeted at graphic designers, engineers, consultants and SOHO users. Prices start at $CDN 1299.
The Acer TravelMate P276-MG-52HH, which starts at $CDN 899, is aimed at accountants, executives and event planners who view large spreadsheets as well as marketing professionals who compare documents side by side. It has an Intel Core i5-4210U processor and 8GB DDR3L SDRAM that is upgradeable to 16GB using two SODIMM modules.
Both TravelMate P276 models have premium NVIDIA GeForce 840M graphics with 2GB of dedicated DDR3 VRAM with the muscle for editing streaming video, creating collateral, programming websites and more. The TravelMate P276 line has a 128GB SSD and a large 1TB 5400RPM hard drive.
Both also have Acer ProShield Manager, a suite of security and manageability tools, to prevent unauthorized access while safeguarding assets and data. It provides pre-boot authentication and protects the notebooks from the BIOS all the way to the application level. Users can create a Personal Secure Drive to seamlessly store and encrypt all critical files. They are also outfitted with Acer Office Manager, a manageability solution which lets IT managers deploy security policies, monitor IT assets, and schedule maintenance tasks in one simple application.
“These are very much niche products for us, a hybrid between desktops and notebooks aimed at SMBs or SOHOs that don’t require much portability,” Prendergast said. “These are not going into schools.”
DDR4 memory, which will be favored by many buyers of performance systems, is close to rolling out, but Prendergast said that they don’t expect that not having it will hurt the sales of these models at all.
“A lot of the market doesn’t even know what DDR4 is,” he said. “It may also be price prohibitive right at the start. We’ve only been phasing in solid state drives over the last year because of price issues. Performance matters for gaming, but that’s a very nichey market.”