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COMPUTERS

Acer is back in U.S. market and going strong

Taiwanese company says it will leap ahead of Dell and other = rivals.

By Dan Zehr
AMERICAN-STATESMAN STAFF
Monday, May 14,=20 2007

Acer Inc. failed in its first crack at the U.S. market, limping away = to watch=20 as Dell Inc. and Hewlett-Packard Co. ascended to the top of the personal = computer industry.

But after bombing in the 1990s, Acer is back. =

=20

ACER

(enlarge=20 photo)

Acer Inc. has used its pricing and design strength in = notebook=20 PCs to establish some clout in the U.S.

=20

(enlarge=20 photo)

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The Taiwanese company has grown at a faster pace than the world's = largest=20 computer makers over the past two years. And with an agreement earlier = this year=20 that puts its PCs on Best Buy shelves nationwide, Acer has acquired a = major=20 foothold for its second foray into the United States.

It's enough to make Gianfranco Lanci, the company's president, = confident=20 about its chances this time around.

"We are quite optimistic about the U.S.," Lanci told Bloomberg News = last=20 week.

And along with that, Lanci proclaimed Acer would surpass Dell as the = world's=20 second-largest maker of notebook computers behind only H-P. He also has = said=20 this is the year Acer will jump over Lenovo Group Ltd. to become the=20 third-largest maker of all personal computers worldwide. Acer took a = slight lead=20 over Lenovo in the first quarter, according to Gartner Inc., which = tracks=20 technology sales and trends, and it should solidify that ranking if it = maintains=20 its recent growth rates.

Granted, neither pronouncement was as bold as the high-tech = braggadocio of=20 days past =97 Acer's share of the worldwide notebook market trailed = Dell's by less=20 than 1 percentage point in the first quarter. And it's already in a dead = heat=20 with Lenovo for third place overall.

"The top positions are rented space," said Charles Smulders, a PC = analyst at=20 Gartner. "Every five years we see new players there."

But Lanci's predictions support the confidence he and Acer have = accumulated=20 with the past two years of soaring growth. The company's shipments = started=20 jumping as consumers and businesses shifted more toward notebook = computers and=20 away from desktop models.

For Dell, Acer's resurgence means another challenger to its long = dominance of=20 the U.S. market. Although still a small player in the U.S., Acer's = worldwide PC=20 shipments increased 37 percent last year. Dell's grew 3.5 percent.

Most of that growth came in Europe. But top rivals have taken notice = of its=20 growing push into the U.S.

H-P, the world's largest computer maker, filed a lawsuit against Acer = in=20 March, claiming it infringed on 10 H-P patents. The suit was widely = viewed as a=20 counter-attack to Acer's U.S. growth.

"They're good at the basic blocking and tackling," said tech analyst = Roger=20 Kay, president of Endpoint Technologies Associates Inc. "They have good = design=20 and good branding. They have a very clear distribution strategy."

In many respects, Acer is the anti-Dell these days. Michael Dell = built his=20 technology colossus on a foundation of super-efficient desktop = manufacturing and=20 direct sales to customers. Acer has relied on notebooks and only sells = through=20 retailers and other third-party channels.

About two-thirds of Acer's business comes from portable computers. = More=20 customers are buying laptops =97 and buying them at retail stores =97 a = fact that=20 clearly benefits Acer and H-P, each of which sell through retail stores = and have=20 seen their shipments jump in the past year.

"They're lucky the winds have blown their way," Kay said. "But they = can't=20 always count on that."

Acer's story is different when desktop sales are factored in. H-P had = 17.6=20 percent of PC shipments worldwide in the first quarter, according to = Gartner.=20 Dell had 13.9 percent of the market, and Acer 6.8 percent.

Although Acer holds 13.2 percent of the worldwide market for = notebooks,=20 according to Gartner, its share of desktop shipments was just 3.2 = percent in the=20 quarter.

"It's just a completely different scale" when desktop PCs are = factored in,=20 said Loren Loverde, an analyst with IDC, which tracks technology sales = and=20 trends.

Much of Acer's growth has come in Europe, where it gets roughly = two-thirds of=20 its business, Loverde said. It has established itself there on low = notebook=20 prices and snazzy designs, including a hot red laptop it co-branded with = automaker Ferrari.

But it hasn't fared as well in Asia, and it has just started to = scratch at=20 the door of the U.S. While its success in Europe has helped it build a = cache of=20 resources to draw upon, cracking into the U.S. market will require more = than=20 good design and low prices.

"Best Buy is a big win," Loverde said. "It's hard to say how quickly = and how=20 much that will translate into volume. What they need to work on is not = just=20 launching that relationship but growing it and expanding it to other = outlets."=20

Acer has built a wide network of re-sellers, but Best Buy Co. Inc. is = easily=20 the crown jewel of the network it has created since jumping full-scale = back into=20 the U.S. market in 2003. Since its first failed attempt to enter the = U.S. in the=20 1990s, the company has used its pricing and design strength in notebooks = to=20 establish some clout.

U.S. retailers "know what we've done worldwide," said Rich Black, = director of=20 marketing for Acer America. "We're just not a local play; we have global = reach.=20 (Retailers) felt more comfortable with us, and shelf space became = available."=20

But to keep that space and expand it, Acer will have to focus on more = than=20 its low prices and sharp designs that attracted buyers in the past, said = Smulders, the Gartner analyst.

H-P, for example, has developed a breadth of other products and = services, he=20 said. And it has done a strong job over the past year with its "The = Computer is=20 Personal" campaign. Both give customers something other than price to = consider.=20

"The biggest challenge to Acer is defining what its brand = represents," he=20 said. "Building brand values other than price is perhaps one of biggest=20 challenges in the PC market."

Lanci said Acer will refresh its entire U.S. line of computers within = three=20 months. The new computers are patterned after natural stone, Black said, = with=20 soft curves and more layers and textures. And the company will continue = to press=20 competitors on price.

That has been a deadly strategy for many upstart computer makers. = Michael=20 Dell often has said he's seen a lot of computer companies make a big = splash with=20 low prices, but they didn't have the profit margin to sustain that = through one=20 of Dell's blistering price wars.

But Dell lately has been reluctant to enter the fray at the low end = of the=20 market, focusing instead on higher-end, more-profitable models of = computers. Its=20 recent struggles and sharp operating improvements by competitors have = blunted=20 its weapons for a price fight.

However, in a February e-mail, Dell said his company "will not run = away from=20 a cost fight!"

Dell also has hinted that the company will reconsider its reliance = solely on=20 direct sales, saying the company's long-standing model "has been a = revolution,=20 but is not a religion." In a more recent e-mail to employees, Dell said = the=20 company will roll out new laptops in June with personalized color = options and=20 improved wireless connections.

"The technology landscape is changing, and we need to change with = it," said=20 Dell spokesman Bob Kaufman. "You'll see that in the consumer and = business space=20 as the year moves on."

None of that seems to phase Lanci, though.

"We are not particularly concerned" about a Dell push into retail, he = told=20 Bloomberg News last week.

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Acer is back in U.S. market and going strong

Taiwanese company says it will leap ahead of Dell and other = rivals.

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