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Acer: We’re comin’ at ya, Dell

The PC company that rose without trace

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And so to Budapest last month for Acer’s annual global press conference. What did I learn?

That Acer in recent years rose without trace to become easily the world’s third biggest PC vendor. That in the first half of this year, the company supplanted Dell to become the world’s second biggest laptop supplier. And that the Acer Aspire One is a pretty cool netbook. I may even buy a couple – with my own money – for the children.

The last time I looked closely at Acer – ooh sometime in the mid-or-late-90s - the Taiwanese firm was one of the world’s biggest OEMs. In other words, it made computers for bigger companies to slap on their own badges and to present as their own. It also sold under its own brand and was fairly successful at this. But it was much better known in the US than in Europe.

How things have changed. Acer abandoned the OEM business years ago – indeed in 2000 it got out of making PCs altogether, hiving off the manufacturing into a separate company called Wistron. Wistron, incidentally is said by Reuters to be keen to buy some PC factories from Dell. It is what is known in the trade as and ODM, or original design manufacturer, and Taiwan is famous for such companies.

Why did Acer, a PC manufacturing powerhouse, want to stop making things?

Survival of the biggest

In recent years, sales of PCs have consolidated, big-time. The US and Japan are the only mature economies in which there are many significant ‘local’ PC makers – but they tend to have names like HP and Dell and NEC and Fujitsu.

In the US and in Europe, the national champions of yore have mostly fallen by the wayside. In due course the emerging economies will follow suit – maybe another Chinese PC maker will break out, to join Lenovo.

Acer saw that average selling prices were under price and margin pressure, that without differentiation, things could only get worse, and that raw performance was becoming an inadequate differentiator. The PC market was already becoming the survival of the biggest.

Acer’s prognosis was commonplace. The remarkable bit is that Acer decided to do something radical, over and above outsourcing the tin-bashing.

In brief, the company decided to build a brand business, to major on notebooks, and target small and medium business and consumers in particular. Also, it looked to the developing world – especially the BRIC (Brazil, Russia, India and China) economies as another growth engine.

In the process, Acer has become something of a Global Brand, for which Taiwan is not famous. Remember, the company once was called Multitech, which shows how much it had to learn.

[The name Acer – which as you all already know is Latin for a tall strong tree, although there is nothing tall or strong about the one in my garden– is the brainchild of an American branding consultancy.]

Channel flannel

Acer has adopted a channel-only policy – it does not sell direct to end-users. This was a key factor in the rise of Compaq in the eighties and early nineties. But nowadays, in a maturing market, channel-only PC companies are as rare as hen’s teeth. In the developed world PC vendors make market, not resellers, and they are just as happy to sell direct, if the custom and the profit warrants it.

So Acer’s channel-only policy may be a throwback, but the policy is reaping dividends.

The company was early into notebooks and this is also paying off in a big way, especially in Europe, which accounts for about half of the company’s expected $20bn revs in 2008. That’s right, twenty billion dollars generated by 5,500 staff, flogging 30 million units through computer dealers and retailers. In the first half of the year, the company grew four times faster than the global market, thanks to acquisitions as much as organic growth.

Europe has become the commercial and marketing powerhouse for the company, with Acer Inc. CEO president Gianfranco Lanci driving the business from his Milan base. The Italian connection is very visible in the company’s big move into sports sponsorship - Inter Milan, Ferrari, MotoGP are current beneficiaries of Acer cash. The company is also to become a major Olympics sponsor, in time for the Vancouver Winter Olympics in 2010.

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