The once-high-flying Acer has hit some turbulence.
Yesterday, Acer Chairman J.T. Wang told a meeting of shareholders that the company misjudged how many of its new Iconia Tab touch-screen tablets it can sell this year and reduced its projections by 60 percent.
Its PC shipments are not doing much better. The most recent PC market health report by IDC showed Acer's shipments down 16 percent in the last quarter, and down 15 percent the quarter before that. It's a major shift for the Taiwanese PC maker who, just four years ago, surprised many as it kept on piling one impressive quarter on top of another.
But now it's becoming clear that several of the factors that contributed to Acer's impressive growth, especially in the U.S. and Western Europe, have shifted and the company hasn't made the necessary adjustments.
It's what likely contributed to Acer's bitter publicin March. Both and Lanci have for Acer losing steam in the sales growth game. Without pointing fingers at who's at fault, here's a look at what has contributed to Acer's recent troubles.
Tablets aren't the savior--yet
Apple has had success with its iPad-- in a little over a year--but its competitors haven't been able to match or keep pace. Since January, several tablets have hit the market behind high-profile marketing campaigns, including the Motorola Xoom, Samsung Galaxy Tab 10.1, RIM Playbook, and the Asus EeePad Transformer, to name a few. So far sales have been less than inspiring.
"The iPad is selling really well, but other than iPad none of the tablets are selling well at the moment to end users," said Mikako Kitagawa, Gartner analyst for tablets. Despite really high expectations for tablet sales, "that's the reality of it" right now, she said.
The Xoom is rumored to have shipped just 250,000, Samsung just under 1 million. Both Gartner and IDC, which track the market for Android tablets, say they'll soon very likely be revising their projections downward from the 69 million and 50 million shipped they respectively projected for 2011.
Besides Google being "slow" about certifying tablet makers on Android 3.0 Honeycomb, the version optimized for tablets, there have been some pricing and usability problems in general with Android tablets so far, said IDC analyst Jay Chou. Meanwhile Nvidia's CEO and have each expressed concern over the market for Android tablets in the U.S.
Acer very recently arrived at the Android tablet party. Its drastic overestimation of its ability to sell them seems to be just that: an overestimation. So a small consolation might be that even though Acer is not doing that well, its fellow Android tablet makers aren't doing all that much better at the moment either.
Too much focus on consumers
A company that rides the consumer tides will go up when consumers have extra money to spend on new PCs, and will go down when buyers don't.
The economy in mature markets like the U.S. can still be described as sluggish. Right now, if they can, the average consumer is likely going to stick with the PC they already own. That's especially true if it's not completely broken down, and as gas and food prices continue to rise. In other words, a 30 percent boost of a processor ismost people opening their wallets.
And for Acer, a company whose portfolio of products is designed for people to use at home or in small businesses, that's not good. Unlike competitors Hewlett-Packard and Lenovo, Acer doesn't have lifelines to large corporate buyers who can be counted on to place periodic million- or billion-dollar product orders. Acer is very dependent on impressing the consumer strolling the aisles at Best Buy or Fry's or Wal-Mart.
Too much reliance on channel partners
Retail partners, which have been great to Acer in the past, are also part of the current problem.
Acer is "not like a Dell, where they take a direct model at least some of the time," said Chou. "They rely too much of the time on Best Buy."
There's nothing wrong with selling through Best Buy, or any other retailer. But Acer is always sold in the context of other brands, lined up on store shelves. Acer does not have a direct relationship with the people it wants to buy its computers, the way Dell or Apple does.
And as sales have floundered, Acer has also been a little too aggressive about shipping products to retailers, resulting in a severe backlog of Acer PCs.
"They were too optimistic about how many PCs they could sell," said Chou. "They forced their channel partners to over-commit and they took a larger amount of inventory than they should have."
That means retailers have to figure out what to do with the backlog, rather than spend most of its time pushing Acer's new products.
The Netbook craze is over
Nobody was better able to capitalize on the sudden obsession with shrunken-down, lightweight, low-power notebooks--Netbooks--than Acer. The company came from seemingly nowhere to work its way up the PC maker ranks in mid-2007, and behind HP in late 2009, thanks to the cheaply priced mini notebooks.
Today's a different story.. Just in the last five quarters, from the beginning of 2010 to the first quarter of 2011, Netbook shipments have been cut in half, from 2.2 million to 1.1 million in the U.S. The falloff of shipments abroad is almost as bad: from 9.7 million to 6.8 million, according to Gartner.
Lenovo President Rory Read yesterday confirmed the direction this trend is heading, when he said, "Netbooks are pretty much over."
Acer made hay in the U.S. by positioning itself as a low-priced alternative notebook brand. While that worked for a while, it's not a place many PC brands are keen to be right now, said Kitagawa.
When your primary selling point is that you're cheap, that's good when people are looking for a second or third PC in a mature market like the U.S., and it works really well when the economy is good. But things change, and buyers tend to be more circumspect when budgets are tight.
"We've seen this trend where consumers are selecting notebooks carefully and are not just price-motivated," Kitagawa said. "If they buy one they're going to stick (with) one for a long time."
Of all the challenges facing Acer right now, that seems to be the toughest one to overcome. The tablet market for Android-based devices is still up for grabs. The consumer market will eventually come back. But it needs a new way to relate to the consumer, and in that regard, Acer has a lot of work ahead of it to change the way customers perceive what its brand stands for.