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Acer to dump 3 million laptops onto European market

Bargains ahoy: Supply chain a-bulge with boxes

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Expect some great deals on Acer laptops in coming weeks. The Taiwanese giant has huge amounts of unsold stock to shift and looks set to flood Europe with more than three million machines.

Where will the stock be dumped and at what cost? We will we know only when they turn up in store at prices too true to be good - for rival notebook vendors. But we understand that negotiations with large retailers have already started.

A spokesman at Dixons Retail said: "We are aware [of the Acer situation] and awaiting more detail before making any decisions."

Acer 'abnormalities'

Acer last week said it uncovered "abnormalities" in inventory stored in freight forwarders warehouses, and accounts receivables from channels in Spain. Clearing this will cost $150m (£90m).

Some read this as CEO and Chairman JT Wang clearing the decks and blaming his predecessor Gianfranco Lanci, who left in March following a boardroom bust up over strategy.

Whatever the reasons, those homeless laptops need to find a sponsor, and with IDC this week cutting 2011 sales forecasts and Gartner warning that the second half of the year will be tough, hard pressed retailers face a challenging time ahead.

According to reports in DigiTimes, Asustek CFO David Chang said Acer's inventory offload would affect his company only if the notebooks incorporate Intel's latest Sandy Bridge processors. He said his company would not get involved in a price war.

Talking to The Reg, Milko van Duijl, president at Lenovo, said it reacted to the consumer slowdown a quarter ago by reducing inventory stockpiled in the channel, and pointed out that its retail biz in Europe was much smaller than commercial shipments.

"Consumer is not that big for us [in Europe] so [the issue] with Acer will be less of a problem but for players that are big in consumer, it will be a big problem," he said.

The Shipping News

Acer requires volume growth of at least 20 per cent each quarter to make a profit, said Eszter Morvay, research manager at IDC, but with consumer appetite for low-cost laptops slowing from Q3 2010 and interest shifting to tablets, the vendor's effort fell short of this.

Transporting by air could add $20 to the cost of a laptop, more for desktops, but IDC reckons only 10-to-20 per cent of all PCs sold across Europe are flown in from the manufacturing base in China, with the rest coming by sea and taking 12 weeks to land.

But given the $150m write down Acer has taken on the chin - pretty hefty in the context of its Q1 2011 prelims that included an operating profit of $65.6m (£40.3m) - it is more sensible to reconsider its channel-stuffing business model.

Nestor Cano, president for Tech Data Europe - the largest IT distributor in the region - said the channel needed to adjust forecasting tools to counter peaks and troughs in demand and all vendors needed to build more flexibility into the supply chain.

"Sending more products by air makes sense to create some room in the supply chain. If not it ends up costing more money for everyone, it ends up with these kind of announcements [from Acer] or price corrections in the market.

"Inventory becomes older technology and consumers don't get the best [specs available], things need to change for the benefit of the channel and [their] customers," he said.

Acer was unavailable for comment at time of writing. ®

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