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Acer hit by first ever loss, sees tablet fever slowing

Taiwanese PC maker suffers first quaarterly loss ever based on reorganization costs and other expenses, while chairman sees tablet fever receding.

With demand down for its notebooks, Acer is looking for tablet 'fever' to decline.
With demand down for its notebooks, Acer is looking for tablet 'fever' to decline. Acer

Acer reported its first-ever quarterly loss yesterday, which it blamed on various expenses and excess inventory, though chairman J.T. Wang stressed that he sees a slowdown to the current wave of tablet fever.

For the quarter ended June, the Taiwanese PC maker suffered a net loss of 6.79 billion in Taiwanese dollars ($234.3 million). That loss compared with a net profit of NT$2.65 billion in last year's second quarter and was considerably larger than the NT$3.3 billion loss expected by several analysts polled by Reuters.

Sales fell by 32 percent from a year ago to NT$102.1 billion.

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Calling the second quarter a "correction period," the company attributed the downturn to a variety of expenses and other factors, including $30 million in U.S. dollars to pay for its current reorganization, $150 million to get rid of excess inventory, and an unspecified though "considerable" amount of severance pay doled out to senior executives.

The severance pay likely included a healthy amount given to former chairman Gianfranco Lanci, who resigned at the end of March following disagreements with the board over the future of the company. Reportedly, Lanci wanted Acer to dive more aggressively into smartphones and tablets, however, Wang stressed the PC as the company's core product and advocated a more cautious move into the mobile market.

Acer has been hit hard by overestimating demand for its PCs. In June, the company lowered the number of notebooks that it expected to ship during the third quarter. Betting too heavily on the popularity of its portable PCs at a time when market has been weakening, the company was stuck with unsold inventory on the retail shelves, which it's been forced to clear out.

In announcing its quarterly results, Acer said it plans to adopt a new business model in which it will keep a closer eye on the market to better control the amount of inventory in the retail chain. Looking ahead, the company expects sales growth and better gross margins for the current and fourth quarters. But it's still facing lower demand for its PCs as a result of consumer appetite for tablets.

Wang said he expects the "fever" for tablets to recede and that notebooks will recapture consumer interest, added Reuters. The company is still facing a loss for the current quarter but one that should be smaller than that for the second quarter. However, the chairman acknowledged that it would be "impossible" for Acer to break even this year.