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Acer still rumbling along toward end of runway - but no sign of liftoff

Shih and Huang sweatily heaving on controls but can they get airborne?

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Acer sales have slumped to a nine-year low, prompting senior industry figures to question if the once high-flying notebook maker is running out of runway.

The Taiwanese firm has reported a 26.6 per cent year-on-year revenue decline for Q2 to NT$60.1bn (£1.24bn, $1.93bn), the lowest quarterly sales since 2006 when Acer was piling 'em high and selling 'em cheap.

In each month, Acer relentlessly filed double digit declines; down 18 per cent year-on-year in April, down 31 per cent in May and falling 27 per cent in June. These figures come days after analysts went public on the firm’s latest shipment clanger for the same period.

Only turnover figures were provided, with fuller financials expected in the not-too-distant future, but with flagging sales, profits will likely dip too - unless some cunning cost cuts were made to an already lean global workforce, numbering some 7,000 in 2014.

The problem for Acer is its continued reliance on notebooks - 60 per cent of sales last year - which overshadows the relatively smaller tab, smartphone, LCD, server and projector lines.

In the last quarter, Acer shipped 4.55 million PCs, although this was down 20.2 per cent year-on-year or 1.15 million fewer units, according to Gartner. IDC claimed Acer shipped 4.33 million boxes, down 26.9 per cent on the prior year, or nearly 1.6 million fewer machines.

The traditional PC market is forecast to wither this year, and next, and in 2017 too, so Acer has nowhere to hide in the short term. The company has hatched a plan to go beyond the PC, moving into apps and more expensive systems, but this will take time ... time that some feel the company may not have.

“It’s a very tough market right now, and this could be the death knell,” said one well respected analyst, “juggernaut Lenovo is attacking consumers and business, HP is flexing its muscle for the battle and in SMB you have Dell going great guns via the channel”.

“How does a company like Acer stay in business?” asked the analyst, who asked to remain anonymous, adding that “there must be some anxious conversations taking place at head office”.

The problems emerged in mid-2011 when Acer failed to react to the slowdown in consumer PC demand, and kept sending containers by sea that were full of entry-level stock. This proved costly to write down and proved to be the first of three years' worth of straight losses.

Ever since, Acer - which in the mid-noughties was one of the top two notebook makers in EMEA - has struggled to find a reason for being that resonates with retail shoppers or businesses.

Founders Stan Shih and George Huang returned to operations in late 2013. Under their influence, the business returned to profit in 2014, albeit making less than £60m on sales of £7bn, margins that tech disties wouldn’t get out of bed for.

Shih once told this reporter (ironically back in 2006) that Acer was the PC vendor of the future as its lean operating model would help it counter falling margins to put others out of business.

This is something Michael Dell once claimed of his company before the "rivers of cash" from Intel claim was made.

The company is still standing, while other notebook makers such as Sony and Samsung have pulled out, but the future of the PC industry no longer seems as clear cut - and neither do the long-term goals of Acer. ®

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