Home » Cloud client SW platforms » Acer’s decision of restructuring: a clear sign of accepting the inevitable disintegration of the old PC (Wintel) ecosystem and the need for joining one of the new ecosystems under formation

Acer’s decision of restructuring: a clear sign of accepting the inevitable disintegration of the old PC (Wintel) ecosystem and the need for joining one of the new ecosystems under formation

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Core information:

Acer’s latest decision is also based on the so called Stan’s Smiling Curve — see much below — which was used already twice for understanding the restructuring needs in times of radical changes in the industry. This is the reason why product value, associated R&D and focusing on telecom channels (= more effective distribution, marketing and sales/aftersales) are emphasized along with consumer oriented products:

Follow-Up (Aug 2, 2011):
Acer & Asus: Compensating lower PC sales by tablet PC push [March 29, 2011 with comprehensive update on Aug 2, 2011] which is showing serious technical and market problems with the original version of Honeycomb

Update: Global PC Shipments Dip 3.2% in Q1: IDC [April 29]

Although the forecast for the quarter was already conservative–IDC expected a mere 1.5% growth in shipments–a steady but still cautious business mentality and waning consumer enthusiasm persisted. A spike in fuel and commodity prices and the disruptions in Japan added to the mix, further dampening a market struggling to maintain momentum, the major international market research firm said.

Despite promising economic sentiments, mature regions appear to be more focused on necessary replacements as a relative dearth of compelling reasons were present to buy secondary PCs. Emerging markets fared better due to lower saturation rates, but also slowed somewhat with Asia/Pacific (excluding Japan) region (APEJ) slowing to a 5.6% growth and China continuing to cool off after a momentous 2010.

Taiwan-based Acer was affected by continued turbulence in Europe, Middle East, and Africa (EMEA) region, its biggest market. Moreover, the vendor is stilling feeling the pullback in the Mini Notebook (netbook) and consumer space, while its upcoming tablet PCs have yet to fill in the void. In the U.S., Acer also ceded its place to a surging Apple in the major market.

Top 5 Vendors, Worldwide PC Shipments, Q1` 20111 (Preliminary)
(Units Shipments are in thousands)

Rank Vendor Q1`11 Shipments Market Share Q11`0 Shipments Market Share YoY
Growth
1 HP 15,191 18.9% 15,624 18.8% -2.8%
2 Dell 10,284 12.8% 10,469 12.6% -1.8%
3 Acer Group 9,039 11.2% 10,733 12.9% -15.8%
4 Lenovo 8,172 10.1% 7,028 8.4% 16.3%
5 Toshiba 4,809 6.0% 4,634 5.6% 3.8%
Others 33,062 41.0% 34,712 41.7% -4.8%
All Vendors 80,557 100.0% 83,200 100.0% -3.2%
Source: IDC Worldwide Quarterly PC Tracker, April 13, 2011

Worth to read along with this: Gartner: media tablets are the new segment next to mobile PCs and desktops, as well as web- and app-capable mobile phones [April 16, 2011]

Update: Acer appoints new president, adjusts corporate organization [April 20, 2011]

Acer on April 19 announced the appointment of Jim Wong, originally corporate senior vice president and IT Products Group president, as new corporate president effective immediately. The company has also separated its IT product global operations into two independent entities, Touch Business Group (Touch BG) and PC Global Operations (PCGO).

Touch BG consists of the original tablet PC and smartphone teams and is led by the new corporate president Jim Wong, while PCGO was originally the main PC product team and is led by president Campbell Kan, former vice president for smart hand-held business unit.

Acer has also set up three functional offices, Chief Marketing Office responsible for brand positioning and marketing strategies, Chief Technology Office for mid- to long-term business planning and integration of technologies, and Operation Analysis Office for studying and analyzing company business models and financial affairs.

In addition, Acer forecasts that its PC shipments in the second quarter of 2011 will decrease 10% on quarter mainly due to the impact of the corporate reorganization, inventory adjustments in main markets, and off-season effects.

Update: Acer changes business strategy from pushing volume to value, says chairman [April 8, 2011] (emphasis is mine)

Acer, in the future, will no longer push only shipment volumes, but will spend more time seeking product value and developing products that consumers need. To accomplish this, Acer will be seeking more R&D talent in the future, Wang noted.

Wang pointed out that a revolution is already in progress in the IT industry and Acer’s change in strategy is a must and the revolution will not only appear in the smartphone and the tablet PC industries. Wang used examples and noted that Microsoft’s Windows 8 operating system for 2012 will add support for ARM-based system-on-chip (SoC) platforms, and the software giant’s new move will completely change notebook and netbook’s designs in the future as future notebooks and netbooks will also feature instant boot capability, and Acer must catch up with all these opportunities.

In addition, Acer will also put more focus on developing technologies such as Clear Fi, touchscreen and software user interfaces, as well as working deeply into telecom channels.

Update: Acer increases Iconia tablet PC orders for April [April 12, 2011]

Taiwan-based PC brand vendor Acer has increased its April tablet PC orders to 500,000-800,000 units, aiming to compete against Motorola, RIM and Hewlett-Packard’s (HP’s) tablet PCs, according to sources from upstream component makers.

The sources pointed out that the 10-inch model is assembled by Compal Electronics with 7-inch model handled by Quanta Computer. Although Acer only placed a small amount of tablet PC orders in March, the company has significantly raised its orders in April with volume for 10-inch models reaching 400,000-600,000 units.

As US-based telecom carrier AT&T is already set to start selling Acer’s Iconia Tab A501, if Acer can also cut into Verizon’s channel, the company is expected to be able to challenge Motorola’s Xoom tablet PC. Acer internally forecasts to ship 5-7 million tablet PCs in 2011.

Acer has also recently started reducing its shipment proportion for netbooks and is aiming to have its tablet PC products cover the gap.

Acer also released a new company logo to show that the company is heading into a new direction and is aiming to create a new brand value.

Update: Acer changes its logo, hopes to start afresh [April 11, 2011]

Acer to initiate corporate restructuring, chairman says [April 1, 2011] (emphasis is mine)

The emergence of tablet PCs has made a strong impact on sales of consumer notebooks and netbooks, making Acer’s strategy ineffective, and therefore Acer has to initiate a corporate restructuring, Acer chairman JT Wang has said.

Wang, who has assumed the post of CEO at Acer after former CEO Gianfranco Lanci resigned on March 31, said Acer will appoint a global president at the end of April.

Wang said as CEO he will be responsible for finance, personnel and global marketing, while the president will supervise product design, product innovation, procurement and logistics services.

Acer’s president for Europe Walter Deppler, president for North America, Emmanuel Fromont, president for China, Oliver Ahrens and chief marketing officer Gianpiero Morbello are all expected to stay at their current posts, Wang said.

Wang also insisted that it is still not necessary for Acer to lower its shipment target for tablet PCs at the moment. Acer aims to ship 5-7 million tablet PCs in 2011.

See as well the following trend-tracking posts of mine. Without reading of them this trend-tracking post of “further information collection” could not be complete:
Acer & Asus: Compensating lower PC sales by tablet PC push [March 29, 2011]
Changing purchasing attitudes for consumer computing are leading to a new ICT paradigm [Jan 5, 2011]
ASUS, China Mobile and Marvell join hands in the OPhone ecosystem effort for “Blue Ocean” dominance [March 8, 2011]
Be aware of ZTE et al. and white-box (Shanzhai) vendors: Wake up call now for Nokia, soon for Microsoft, Intel, RIM and even Apple! [Feb 21, 2011]
Marvell to capitalize on BRIC market with the Moby tablet [Feb 3, 2011]

‘Mutant viruses’ sicken Acer, Asustek [March 29, 2011] (emphasis is mine)

Sales of their own-branded computers have taken a big hit and now the companies are scaling back unit volume projections for the first quarter. In fact, growth will be negative as these two netbook pioneers struggle to regain their footing in the face of the iPad onslaught.

Back in September, Stan Shih called Apple products “mutant viruses,” telling the Asian technorati gathered to hear his speech that his company, Acer, and other Asian PC boxen makers would eventually overcome the threat posed by the iPad, iPhone and insurgent Mac. However, that pronouncement was followed in October by the news that Apple Mac unit volume surpassed Acer in the US.

Acer founder Stan Shih -- 15-Oct-2009

Talk of the day — Acer needs reengineering: founder [March 30, 2011] (emphasis is mine)

Acer Inc., the world’s second-largest computer vendor, needs reengineering and repositioning because its previous winning formula is not effective any more, its founder Stan Shih said Tuesday.

Shih, who no longer manages the Taiwan-based multinational computer group but still controls a huge stake in the company, made the suggestion on the sidelines of a cultural seminar.

His advice came after Acer unexpectedly lowered its PC sales estimate for the first quarter of this year last Friday and gave a conservative forecast for its Q2 business prospects.

Acer revised its forecast on Q1 PC sales downward, from an annual increase of 3 percent to an annual decline of 10 percent, citing weaker demand in western Europe and the United States.

The following are excerpts from the local [Taiwanese] media coverage of Shih’s remarks:

Economic Daily News:

Shih acknowledged that smartphones and tablets have had a significant impact on the personal computer industry.

He expressed the view that Apple’s products, such as iPhone and iPad, have brought new visions and new concepts to the technology industry.

The prevalence of smartphones and tablets has made Acer’s original target of expanding its global PC market share obsolete, ” Shih said. “It’s no longer meaningful for Acer to pursue growth in sales volume. Acer should from now on focus upgrading its profit margins.”

Because of changing business environment, Acer underwent a major re-engineering almost once every 10 years.
In 1992, Acer reshaped its increasingly bloated organization under a lean and mean strategy. During the period, Shih came up with a “smiling curve theory” that stressed the importance of branding and research and development.

Its second reengineering effort came in 2000 when the company incurred huge losses because its contract production often hindered its branding efforts. Acer decided that year to spin off its contract manufacturing business while focusing on selling its brand-named PCs.

Over the past decade, Acer has emerged as the world’s second largest PC brand.

Now the company is at a crossroad again. Shih said Acer has only lowered its business forecast and has not incurred any losses.

“But its misforecast indicates that the PC market is undergoing substantial changes, ” Shih said. “The unexpected slow sales in Q1 should serve as a wake-up call. It’s time for Acer to undergo its third wave of re-engineering and re-positioning.”

Noting that Apple not only sells products but also sell services and that HP has announced its decision to install its Web OS system in its PCs, Shih said Acer should come up with new strategies to sustain its growth. (March 30, 2011).

Commercial Times:

Shih said it’s all too common for a business corporation to hit snags or face challenges.

“What counts most is change and re-engineer,” Shih said.

For Acer, he noted, the most urgent now is re-positioning and reshaping in order to achieve a breakthrough.

Shih suggested that Acer maintain transparency in its reengineering efforts and strengthen communications with the business community to bridge gaps in market expectations.

Thanks to Apple’s contributions, new business models have emerged, with close cooperation between smartphone and telecommunciation service operators, Shih said.

In the face of this new market trend, Acer should act quick and change fast, he stressed. (March 30, 2011).

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Stan’s Smiling Curve

Acer -- the Stan Shih Smile Curve

Smiling (Smile) Curve theory was invented by Stan Shih Ex CEO of Acer Computer in his 1992 book. The theory gained its popularity due to the fact it outlines the industrial structure of Taiwan, specifically the electronic industry at the time. The smile curve’s left hand side includes the technology, patent, research and development. The middle section includes assembly, manufacturing. On the right hand of the curve is marketing distribution and after service. The x-axis is showing the value chain (stage of production) from the concept to end user. The y-axis is for the value-added.

Based on this vision, Acer has adopted a business strategy to recreate itself from a manufacturer into a company that focuses on global marketing of brand-name PC-related products and services. Meanwhile, Acer also has invested aggressively in R&D to develop innovative technology. The concept later became widely cited to describe the distribution of value-adding potentials in various industries to justify business strategies aimed at higher value-adding activities.

More information on that in terms of recent (2007) circumstances see: The Knowledge Based Economy [April 25, 2007]:

Michael Nystrom: … manufacturing does indeed appear to be the lowest value input. This is why, the capitalists say, the world has evolved to the point that it has. “We think, they sweat,” they say. We of course, are the Americans and they are the sweating Asians.

Clever, isn’t it? But I have a nagging feeling there is something wrong with the theory, though I’m not exactly sure what. Perhaps I’m too rooted in the old economy, unable yet to adjust to the idea of the “knowledge economy.” But I have a feeling there is something more.

What is wrong, if anything, with the model? Or am I just a dinosaur?

Mike Shedlock / Mish: … there is nothing wrong with that chart. One can clearly look at China, India, and SE Asia in general and see without a doubt what is happening. And in spite of enormous increases in [the price of] raw materials, the prices of finished goods have barely risen.

Are cars, boats, pottery, computers, monitors, printers, light fixtures, etc keeping up with the prices of raw materials that make them? Clearly the answer is no. The curve reflects what is happening. In fact, the curve represents additional profit that can be had by shifting manufacturing to low cost providers. That is in essence the very foundation of global wage arbitrage. However, You are missing several key points.

Key Points

  1. Global wage arbitrage is not just about manufacturing
  2. The US has no intrinsic brainpower advantage
  3. The smile curve is flattening

… [worth to read in entirety]

Comments by Stan Shih at Year 2004 (from Me Too Is Not My Style, Update Edition* [August 8, 2010]):

[to the Chapter 3: A Lesson in Intellectual Property]

According to Stan’s Smiling Curve, the research/development innovation in the intellectual properties (IP) portion is the key of future industrial and corporate competitiveness, in the knowledge-based economics. The IP development should be based on the market need; otherwise it will be un-marketable technologies which are the mistakes many entrepreneurs and IP owners often make. In the new economy, creating a new business model is also a kind of an IP development. Again, it has to be profitable to be sustainable; if not, it will be just self-indulgence. Acer has set up Acer Value Lab to master the market need and develop the technologies and products, from the viewpoints of the users. (Please refer to Chapter 7 “The Smiling Curve for a New Century” in “Millennium Transformation—Change Management of New Acer”.)

[to the Chapter 9: Paradigm Shift in the Information Technology Industry]

I proposed the theory of “Stan’s Smiling Curve” to illustrate the new tendency in 1992, at which time the information technology industries had started to dis-integrate into up-, mid-, and down-streams. This was
different from the integrated PC business by those earlier computer companies. After the onset of dis-integration, PC industries have gone through many important changes, including a complete outsourcing model, the merger of Fujitsu and Siemens, and HP merged Compaq. Recently, some investors propose that do not invest the PC companies except Dell and Apple Computer, both whose positioning are exceeding a PC company. During the process of this industrial change, Acer has successfully repositioned. We gradually expand the product lines and
enhance the IT service businesses, and have become an exceeding PC company. We were lucky to catch the earlier opportunity and have transformed into a branding and marketing service company.

[to the Chapter 11: “Go Game Strategy” and “Stan Smiling Curve”]

“Stan’s Smiling Curve” theory has been well-recognized internationally in a variety of industries. In addition to the IT industries, consumer-electronics, and software industry, the similar development has been seen in semiconductor, digital learning, and agricultural industries. All the industries and companies should go toward the both ends on “Stan’s Smiling Curve”. That is, to enhance the research and development, and marketing, so that the corporate value can be generated. I had also designed two value formulas: corporate value formula and brand value formula. (Please refer to Chapter 8 “Creating Brand Value” in “Millennium Transformation – Change Management of New Acer”.)

* original publication:  Stan Shih, Me-Too Is Not My Style: Corporate visions, Strategies and Business Philosophies of the Acer Group, 1996; The Acer Foundation

Millennium Transformation – Change Management for New Acer [August 8, 2010]):

[from the Preface for the New Edition [Me Too Is Not My Style, Update Edition] Learn the Future from the Past:]
Then, I wrote the book “Millennium Transformation”, in which Acer’s highlights from 1996 to 2004 was recorded, following the first two decades of Acer described in this book. During the eight years illustrated in “Millennium Transformation”, Acer had gone through several significant transitions, especially the second re-engineering at the year end of 2000. The changes of background and decision processes of these transitions were more dramatic than that in the first re-engineering in 1992. After the 2nd re-engineering, Acer has successfully broke the growth limit and created another peak of business.

From: http://www.stanshares.com.tw/StanShares/portal/ebook/index.aspx

This is a Chinese based website [www.stanshares.com.tw ]. It is mainly about Mr. Stan Shih, the founder of Acer Group/ Chairman of iD SoftCapital Group, sharing his concept of management and philosophy of life.

It also includes 2 English books by Mr. Stan Shih – “Me Too Is Not My Style” and “Millennium Transformation – Change Management for New Acer“. If you are interested, you are welcomed to read it on-line or download the books for free.

[all his books: http://www.stanshares.com.tw/stanshares/portal/book/index.aspx]

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CEO and President Gianfranco Lanci’s resignation:

Acer trade volume erupts after pep talk by founder [March 31, 2011] (emphasis is mine)

Trade volume for shares of Acer Inc. erupted yesterday after its founder gave a pep talk, urging that the company should not focus on being No. 1 so much as it should on increasing profitability, in the midst of fierce competition from smart phone and tablet PC makers.

Acer last Friday shocked the PC industry by slashing its sales forecast for Q1 from an increase of 3 percent year-on-year to a decline of 10 percent. The company’s stock fell to its daily limit both on Monday and Tuesday, with foreign institutional investors selling a total of 6,273 units on Tuesday alone. Each stock unit is 1,000 shares of that stock.

Investment trust firms pretty much followed in foreign investors’ footsteps, while securities firms were on the buy side both on Monday and Tuesday.

What was seen as motivational talk by ever so iconic Acer founder Stan Shih Tuesday put an end to the selling spree yesterday, as the shares closed with total trade volume of 148,000 units. The stock however closed down again, albeit by a much smaller margin of 3.8 percent, to NT$60.7, still above the critical NT$60 level. The TAIEX dropped nearly 50 to 8,646.31.

Tuesday, Shih, who still serves as a director on Acer’s board, urged the PC giant to undergo another restructuring effort to ward off competition from smart phone and tablet PC makers.

We’re only slashing our sales forecast, not reporting a loss,” he said. “Yet the mere fact that we had to downgrade a number that we had had wholehearted confidence in suggests the kind of challenge we’re faced with.”

He pointed out that Acer undergoes a major restructure effort about every ten years. “Now is about the time,” Shih said.

He said Acer first has to abandon its “No. 1 in the market” mentality. Given diminishing profit margins that PC manufacturers are faced with, the correlation between No. 1 and profitability is no longer absolute, he said.

Being No. 1 in the market is only a superficial victory, something that makes our faces look good,” he said. “Yet realistically, we could have lost more through an erosion of earnings and profitability.”

He said what Acer needs to do, as Apple has proved time and again, is to “sell products” as well as “sell service.” The business model in which a manufacturer purely makes hardware will no longer work, he said.

Acer must seek to change: founder [March 31, 2011] (emphasis is mine)

Acer Inc founder Stan Shih on Tuesday (March 29) said that the the world’s second largest PC maker must “seek to change.” The company has repeatedly made inaccurately forecasts for its performance outlook, seriously disappointing shareholders and damaging the company’s image.

Shih told Taiwan PC maker’s management team that it was common for enterprises to encounter operating difficulties, though he was quick to add that Acer’s current problems may suggest its past formula for success has now become outdated.

Shih’s remarks are viewed by many in the industry as a sign that Acer will launch a third round of restructuring in the near future following similar moves in 1992 and 2000.

Acer’s latest inaccurate forecast was admitted on Friday (Mar. 25) when the company unexpectedly revised downward its revenue forecast for the first quarter. However, just a week earlier, senior Acer officials had assured foreign investors at a forum that their previous export growth prediction for the company for January to March remained unchanged.

The subsequent revision seemed to indicate Acer had failed to grasp the trend in a fast-changing world market.

Last year, the Acer founder also raised the idea of restructuring. However, his remarks this week were more direct and strident. “When a company is faced with problems and difficulties, it must make internal adjustments, change the old mode of thinking, establish new core competencies and look forward,” he said.

Shih said that when the broad circumstances are changing, companies must face up to the challenges and devise countermeasures. “This industry very obviously has entered into the era of mobile phones and telecommunications. Tablet computers and handsets have become the mainstream. I must say we should thank Apple for opening a way for everyone to follow.”

Looking back to the company’s 2000 reforms, a change which Shih said he had originally expected to take two to three years to push through. In fact, he said, it took only one year for the company to achieve its goals.

Shih attributed the latest gap between forecast and performance to a lack of good communication with the outside world. As for whether Acer will continue to pursue the target of becoming the world’s top 1 own brand PC maker, he said, “No. 1 is no longer that important, because even if you occupy the largest market share, it still would not guarantee high profits. So what is important is to look for change.”

Acer’s 1992 corporate reforms proved successful in part because the company acquired the laptop computer division of Texas Instruments and also partly because it recruited an outsider, Gianfranco Lanchi, as its general manager.

However, in the last two to three years many of Acer’s senior executives have retired, with the company bringing in larger numbers of foreign nationals to join its management team. This development has raised worries among employees that Acer has been following a policy of “de-Taiwanizing.”

In the last two trading days, Acer’s shares have dropped by the daily limit, causing the company’s market valuation to shrink by NT$26 billion (US$882 million).

Acer CEO Gianfranco Lanci with Dadi Perlmutter head of Intel Architecture Group at Computex 2010

Acer CEO and President Gianfranco Lanci resigns – With immediate effect [Acer press release, March 31, 2011] (emphasis is mine)

Acer CEO and President Gianfranco Lanci has resigned from the company, with immediate effect. Acer Chairman J.T. Wang takes acting role in the interim. The company has commenced with the planning of organizational and operational adjustments for the sustainable future of Acer.

The resignation was approved at a meeting of Acer’s Board of Directors today, and the company has communicated internally with its worldwide employees.

On the company’s future development, Lanci held different views from a majority of the board members, and could not reach a consensus following several months’ of dialog. They placed different levels of importance on scale, growth, customer value creation, brand position enhancement, and on resource allocation and methods of implementation.

The change does not affect current operations which are functioning as normal. Acer’s strong management team of multi-nationals has been well-informed and is committed to overseeing and implementing the company strategies, as does the amicable company relations with industry partners persist. Acer will continue to push for globalization, follow its multi-brand and channel business model, develop competitive products and services, and foster closer relations with key vendors and channel partners.

Acer Chairman, J.T. Wang expresses, “The personal computer remains the core of our business. We have built up a strong foundation and will continue to expand within, especially in the commercial PC segment. In addition, we are stepping into the new mobile device market, where we will invest cautiously and aim to become one of the leading players.”

“In this new ICT industry,” continued Wang, “Acer needs a period of time for adjustment. With the spirit of entrepreneurship, we will face new challenges and look to the future with confidence.”

In his role as President and CEO, Lanci has contributed significantly toward Acer’s growth. The company expresses its true appreciation for Lanci’s efforts and wishes him all the best in his future endeavors.

Some reports on that resignation:
Acer CEO Lanci Quits After Clashing With Board; Wang Takes Over [Bloomberg BusinesWeek, March 31, 2011]:

The 56-year-old executive earned a civil engineering degree from the Politecnico of Turin, where he was born. He joined Texas Instruments Inc.’s Italian unit in 1981 and became country manager for the Portable Computers and Printers Division in Italy, the Middle East and Africa by age 37, according to Acer’s website. In 1997, he was named managing director of Acer Italy after Texas Instruments’ portable PC business merged with Acer.

Lanci, who enjoys reading and playing tennis, was promoted to president of the International Operations Business Group in 2003 after heading Acer’s operations in Europe, the Middle East and Africa, according to Acer.

Wang, born two months before Lanci, became chairman in 2008 after Lanci succeeded him as CEO. Wang has a bachelor’s degree in electrical engineering from National Taiwan University and an Executive Master of Business Administration degree from Taiwan’s National Cheng-Chi University.

Acer CEO Lanci quits after boardroom bust up [MicroScope.co.uk, March 31, 2011] (emphasis is mine):

Acer has the lowest operating expense in the PC industry base and used strong relationships with the Original Design Manufacturers (ODMs) to offer price points that lured consumers in and underpinned its rise to the top.

However, consumer confidence and growing interest in tablet PCs resulted in an abrupt end to booming mainstream notebook sales, and highlighted Acer’s reliance on the segment, despite its efforts to diversify through acquisition.

Ranjit Atwal, principal analyst at Gartner, told MicroScope that Acer had made a good fist of becoming a major player in the PC space but the consumer boom was over and its efforts to build in the professional market were more muted.

Fundamentally, Acer’s business model is predicated on maintaining volumes in consumer mobile PCs which allows them to maintain and increase margins. But consumers are now generally backing off buying traditional PCs,” he said.

Atwal said that Acer’s efforts in the professional mid-market, led by the Gateway brand in Europe, had not compensated for the drop in consumer demand.

“Given that the professional market is moving away from a box mentality – most vendors are trying to provide solutions the whole sale is becoming more complicated in terms of how you get to the business customer,” he said.

Acer Joins AMD In Not Having a CEO [Softpedia, March 31, 2011]:

Hearing that AMD, even after so much time, still doesn’t have a permanent head figure probably has consumers wondering, but it looks like Acer might just go through a similarly tumultuous period now that its own CEO resigned.

Consumers keeping track of happenings on the IT industry will most likely have learned of how Advanced Micro Devices has been bereft of a Chief Executive Officer for months now.

The previous one, Dirk Meyer, left the company about two months ago and actually came as a surprise.
Now, Acer has provided onlookers with a similar surprise, as CEO and President Gianfranco Lanci has submitted his resignation.

Gianfranco Lanci Calls It Quits As Acer CEO [mocoNews.net, March 31, 2011] (emphasis is mine):

Has the impact of the iPad 2 claimed its first executive victim?

In November the company made a big splash showing off its newest mobile computing devices.

This was a departure from its traditional main line of business of making PCs, and the hybrid culture resulted in at least one curious product that, depending on who you asked, was either innovative or just plain odd: the Iconia (pictured), in which what appears to be a laptop on the outside unfolds to reveal a two-screened tablet on the inside.

But since November, things, as they say, have moved on, and new product launches from other Android players as well as Apple (NSDQ: AAPL) with its iPad 2 have clearly shaken up Acer.

J.T. Wang remaining at the helm:

Acer chairman JT Wang -- 31-May-2010 2010 Time 100 selects Acer’s J.T. Wang as one of world’s most influential people [April 30, 2010]

CEO of Acer Group and also the chairman of Taipei Computer Association (TCA) was listed in number two spot under the Leaders category of the recently Time Magazine’s annual top 100 world’s most influential people. Top world’s leader and individuals including Brazilian President Luis Inacio Lula da Silva, US Pres. Barack Obama, former US Pres. Bill Clinton, Sarah Palin, Apple’s Steve Jobs, Oprah Winfrey, Lady Gaga and etc were listed.

J.T. Wang By Michael Schuman [Time Magazine Apr. 29, 2010] (emphasis is mine)

One of the great trends of the next decade will be the rise of Asian companies. Long known for efficiency and manufacturing prowess, they’re now becoming more adept at the “soft” elements of business — marketing, design, branding and strategy — and that’s making them fiercer competitors.

J.T. Wang, 55, CEO of the Taiwanese PC maker Acer Group, is a harbinger of the future. When Wang became top executive in 2005, it ranked fifth in the global PC market. Acer has since stormed up the charts to No. 2, with more than 14% of the market, ahead of Dell and behind only HP.

Wang, who has worked at Acer for 29 years, is winning out with his knack for tapping into consumer trends — jumping headfirst, for example, into the craze for netbooks. “We don’t judge,” Wang once said. “We do what the customer really wants.”

Acer’s old directional statements back in November, 2010:

Acer Aims for 15% Revenue Growth in 2011 [Nov 2, 2010] (emphasis is mine)

Optimistic about PC market prospects, the Taiwan-based Acer Inc., now the world`s second largest PC vendor now, aims to achieve a 15% sales revenue growth in 2011, with notebook PC shipment to exceed 50 million units, according to the firm`s chairman J.T. Wang. This has showed Wang`s ambition to unseat HP in the market.

Wang also shows his optimism about PC market outlooks in 2011, indicating that prices of notebook PCs in the global market will remain steady throughout the year. The market situation will also help to stabilize the ASP (average selling price) of its products in the year.

Not worried about Apple`s iPad tablets gradually replacing netbook PCs in sales, Wang also commented on the rise of Apple`s iPad tablets, saying that the phenomenon has brought about positive momentum in the global PC market, and that scale of the segment will continue growing in 2011. Worth mentioning is that Acer will accelerate its foray into the segment, planning to release its newest tablet PC running Microsoft`s operating system this month. The firm`s Android-based tablet is slated for debut next year.

To adapt his firm to an ever-changing market, Wang stated that each of Acer`s devices will be installed with the software “Acer Clear.fi” starting in the first quarter of next year, which will satisfy its customers with better hardware integration so as to help enhance value of its products.

Acer`s CEO Gianfranco Lanci added that the firm will step up exploring emerging markets as Brazil, Russia, India, Indonesia, etc. [i.e. BRIC] Hopefully, the firm will take over HP`s leading position in the global market for notebook PCs next year.

Acer to Set Up 2nd Chinese Headquarters in Chongqing [Nov 4, 2010] (emphasis is mine)

Acer will also rally its contract manufacturers, including Compal and Wistron, and supply-chain member firms to establish factories in the city, thereby forming a complete manufacturing clustering. The company is scheduled to sign a contract with Chongqing City government for the project in December.

The Chongqing headquarters will be essential for Acer to expand its presence in the Chinese market, in order to become the world`s leading PC brand. Gianfranco Lanci, chief executive officer of Acer, reported that the company has targeted raising the share of the Chinese market in its total revenue to 20% by 2013, up from 7% now.

Acer Steps Up Market Push in Mainland China [March 23, 2011] (emphasis is mine)

Acer Inc. is stepping up market push in mainland China by building partnership with the mainland`s retailers.

Almost one month after signing a pact to provide electronics retail chain Suning Corp. with US$500 million worth of computers in two years, Acer recently licensed online electronics retail chain 360buy.com to offer after-sales service in the mainland for it.

It`s the first ever after-sales service licensing that Acer has signed with a mainland Chinese retailer, showing the company`s determination to boost sales in the mainland. 360buy.com raked in revenue of RMB10 billion (US$1.5 billion at US$1:RMB6.5) in 2010, up 100% from 2009.

Last year, Acer signed a contract to provide the online retailer with RMB100 million (US$15 million) worth of notebook computers.

When a trade mission composed of representatives from heavyweight enterprises in Nanjing visited Taiwan in February, Acer signed an agreement to supply US$500 million worth of computing products to the Nanjing-based Suning.

Acer Chairman J.T. Wang pointed out that his company`s sales through Suning spiked seven folds in the second half last year from the same period of a year earlier. The retailer is operating 1,400 shops in the mainland. Wang estimated Acer`s sales through the chain to further rise three folds this year.

Acer has projected its sales in the mainland at US$2.5 billion for the year, surging 70% from last year. In the meantime, the company`s market share in the mainland is estimated to rise to 13-15%, up from current 10%.

Acer`s sales in the West have slumped because of maturity of the markets there, prompting the company to depend on mainland China for huge growth in the years to come.

Thus the originally planned BRIC focus, especially the mainland China part has been unable to sustain Acer’s old strategy of growth!

Regarding what one of the options for restructuring could be:

Should Acer consider a Nokia type deal with Microsoft – but for laptops? [March 30, 2011] (emphasis is mine)

If the agreement between Nokia and Microsoft works out in the end it is a big win for both companies, and the consumer. Microsoft gets a dedicated partner willing to do whatever it can to promote Windows Phone 7 and Nokia gets the inside track to the Windows Phone 7 OS.

Now, I have said here before that I believe that Microsoft should be taking a strong role in the hardware end of the business that its Windows platform runs on. We have that in a limited scope with the Microsoft Signature brand laptops and desktops available in the Microsoft Stores.

In this aspect the consumer is a big winner because they know that they are getting a computer that has been optimized to run the Windows operating system at its best. No more of the crap ladened computer with sub-optimal components in pretty boring shells.

Today Stan Shih, Founder of Acer, said at an event in Taipei that the company needed to rethink its philosophy when it comes to being the world’s biggest PC vendor and focus on better and more distinguishable products.

If this indeed the case maybe Stan and Steve should sit down together and see if they can help each other out in the same fashion that Nokia is working with Microsoft.

There is no doubt that Acer build some really good hardware but by forging an alliance with Microsoft they could possibly gain some freedom to come up with some innovative and cool shells for their good hardware.

From Microsoft’s side I am sure that a special deal could be offered up in regards to its software whether it be consumer or enterprise.

This doesn’t even bring up the fact that Acer is getting into the mobile market as a handset maker, although this might be off the table given the Nokia deal.

This is pure speculation and will likely never happen but an interesting idea all the same.

Deeper background:

This is what happens when the essential creator of the PC (Wintel) ecosystem, Microsoft Corporation is repeatedly failing to deliver the next great client offering despite its numerous claims in the row from as far back as January 2010.

See what happened in that regard:
HP’s Windows 7 Slate Device Revealed by Steve Ballmer [Techmeme, Jan 6 – Jan 10, 2010]
Windows slates in the coming months? Not much seen yet [this trend-tracking blog, July 13 – Oct 9, 2010]

This is what happens when:
– things are continuing with Microsoft stance of just talking about Windows slates but no products on the horizon plus Windows Phone 7 will come out only in November
– while at the same time Apple and Google/Android are creating a very fast growing, new consumer market for computer powered client devices, and as a consequence:

1. Goldman downgrades Microsoft, makes case for major overhaul [Oct 3, 2010] along with which a radical proposal was put forward:

A break-up of the consumer businesses could potentially unlock hidden value, or more discipline on cost could turn the businesses into contributors to profitability and shareholder value. For example, the Xbox products could be an appealing stand-alone entity, given the historical success of the Xbox and the products’ brand strength, and the business could show unlocked value with forced cost discipline compared to as a piece of Microsoft. To date the company’s comments suggest that management still sees significant value in combining the consumer and enterprise efforts, but we view a foot in both camps as preventing a successful focus on one strategy, a la Oracle in the enterprise or Apple for consumers.

Gartner 630 with Ballmer at Gartner Symposium ITxpo Orlando 2010

2. And still in A Mastermind Interview With Steve Ballmer, CEO, Microsoft [Oct 21, 2010, see the video record which is clickable from there] on the Gartner Symposium/ITxpo Orlando 2010 Ballmer said (when confronted by that opinion) that Windows is Microsoft’s biggest consumer product and continued:

When people say nutty things like Goldman you ask what part of Windows would you like to spin out? There is no rationale. The reuse of technology across the consumer and enterprise is the way forward.

3. Moreover he argued for his position that Linux and Android is reused for both markets with the same code base—just like Windows.  Then he put forward his best argument against the idea that Microsoft should spin out a consumer business:

… is next to crazy. It’s next to the craziest discussion I’ve ever had. Nobody wants a different UI per device. … People want the same thing at work they wanted at their home. …

… [the fact that there were] 200 million plus Windows consumer PCs in the last year alone says there is a lot of people are thinking in that direction, across the world. … I know we have competitive challenge, but part of the challenge is people walk in [to their IT department] with their iPad saying I want it at work. They do want the same things at work that they have at home, whether that comes from us or from our competition. … People will ask for things at work that they love, that they buy with their own money .

4. While answering the 4th part of Gartner 630 (6 short anwers to simple questions in 30 seconds max) about the coolest product introduced or to be introduced in 2010 and indicating the Xbox Kinect coming in November he is getting teased by a quick question whether that will be the consumer version or the enterprise version to which he responds with (turning like an artist away from the interviewers and towards the audience):

Let me help these guys! What they don’t understand: cool starts at home.

Gartner 630 #2 with Ballmer at Gartner Symposium ITxpo Orlando 2010

This is what happens when despite of this clear understanding by Microsoft and its CEO that recognition was starting to be delevired ways too late as reported in detail by my other trend tracking posts:

ASUS Eee Slate based Windows marketing from Microsoft [March 21, 2011]

CES 2011 presence with Microsoft moving to SoC & screen level slot management that is not understood by analysts/observers at all [Jan 7, 2011]

while still unanswered questions remain:

How Microsoft is going to solve the problem of assuring HTML5 et al platform stability for web developers? See more information.

Microsoft’s upcoming CES 2011 announcement of a Windows slate overlay software for touch-first HTML5 applications could have true competitive impact on the overall tablet (iPad etc.) market, see more information. <<< this had not been delivered there (see CES 2011 presence with Microsoft … )

Microsoft has a new overall platform strategy based on evolving HTML 5, and an enhanced one for its own Windows client devices, see more information.<<< this had not been delivered yet (see CES 2011 presence with Microsoft … )

and generally it is still true that:

Microsoft and HTML 5: new platform?leading compliance?

although the new platform? question goes back to Microsoft going multiplatform? [Sept 17, 2010].

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3 Comments

  1. […] associate and/or prelimary reading from this trend-tracking blog: – Acer’s decision of restructuring: a clear sign of accepting the inevitable disintegration of the o… [April 1, 2011] – Acer & Asus: Compensating lower PC sales by tablet PC push [March 29, 2011] – […]

  2. […] 2011] –> Microsoft on five key technology areas and Windows 8 [May 24, 2011] –> Acer’s decision of restructuring: a clear sign of accepting the inevitable disintegration of the o… [April 1 – Aug 2, 2011] –> CES 2011 presence with Microsoft moving to SoC & screen […]

  3. […] for the post Wintel era starting with AMD Fusion APUs [Experiencing the Cloud, June 17, 2011] – Acer’s decision of restructuring: a clear sign of accepting the inevitable disintegration of the o… [Experiencing the Cloud, April 1, 2011] – ASUS, China Mobile and Marvell join hands in the OPhone […]

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