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Acer vows to beef up venture capital fund

The company will enlarge its coffers fivefold in the next three years as it attempts to shift from being a hardware provider to a developer of Internet devices.

CYBERJAYA, Malaysia--Acer will enlarge its venture capital fund fivefold to $1 billion from $200 million in the next three years as the company attempts to shift from being a hardware provider to a developer of complete solutions and Internet devices.

Chairman and chief executive Stan Shih told CNET Asia that Acer currently has three funds spread over key markets in the United States, Taiwan, Southeast Asia, Israel, and Australia.

Shih said the funds were part of Acer's strategy to move into Internet-related and software industries, particularly intellectual property and service sectors.

"This began a year ago and is the new direction of Acer on top of pure hardware manufacturing. We have to leverage on IP and services to enhance our competitiveness. That is critical. It is the future and we don't have a choice. But it won't be easy," Shih said.

He spoke to CNET Asia at the third international advisory panel meeting of the Multimedia Super Corridor project held in Malaysia.

Shih previously said software would make up a third of Acer's revenue and one-sixth of its income by 2010. Today, software accounts for less than 5 percent of the hardware manufacturer's revenue.

He said Acer may set also up a $20 million venture capital fund to support Multimedia Super Corridor companies in Malaysia. If Acer's new fund materializes, it will be the second fund set up directly to support MSC companies hungry for capital injection.

The Malaysian government recently set up a $31.6 million venture capital fund after it failed to pique the interest of foreign venture capitalists.

Shih expressed reservations about the government-led fund set up by MSC promoter Multimedia Development Corporation and a government investment arm. "Venture funds should be set up by private sector. All the decision-making shouldn't relate to government policy only," he said.

Shih said as result of the crisis, Malaysia may take a longer time to realize its ambitions of making the MSC a regional multimedia hub. He said one of the key elements it lacked was local financial and private sector commitment.

Julian Matthews reported from CNET Singapore.