Bloomberg News

Acer Sees Success in Chrome; Windows Fails to Drive Sales

January 27, 2013

Acer Inc. President Jim Wong

Jim Wong, president of Acer Inc. Photographer: Maurice Tsai/Bloomberg

Acer Inc. (2353), the Taiwanese computer maker that’s suffered two consecutive annual losses, posted strong sales of notebooks using Google Inc. (GOOG:US)’s Chrome platform after the release of Microsoft Corp. (MSFT:US)’s Windows 8 failed to ignite the market.

Chrome-based models accounted for 5 percent to 10 percent of Acer’s U.S. shipments since being released there in November, President Jim Wong said in an interview at the Taipei-based company’s headquarters. That ratio is expected to be sustainable in the long term and the company is considering offering Chrome models in other developed markets, he said.

Acer, which last week announced a NT$3.5 billion ($120 million) write-off on the value of its Gateway, Packard Bell and eMachines brands that pushed it into losses, is looking for alternatives as Windows-based computers struggle amid rising popularity of tablets and smartphones. Global computer industry shipments dropped 6.4 percent in the fourth quarter despite Microsoft’s latest operating system being released during the period, according to IDC Corp.

“Windows 8 itself is still not successful,” said Wong, whose company posted a 28 percent drop in fourth-quarter shipments from a year earlier. “The whole market didn’t come back to growth after the Windows 8 launch, that’s a simple way to judge if it is successful or not.”

The success of Chrome, a free operating system developed by the world’s largest search-engine provider, poses a challenge to Microsoft, which is struggling to convince users to buy the latest version of its platform which, according to researcher Net Market Share, comprises 92 percent of the global market.

Security

Windows 8, released in October, accounted for 1.7 percent of computers in use during December, compared with 45 percent for Windows 7 and 7.1 percent for Apple Inc.’s Mac systems, according to the Aliso Viejo, California-based researcher.

Chrome’s “value is that it’s more secure,” Wong said. Early adopters have been more professional, heavy Internet users with educational institutions, and corporations are also likely to show interest in the operating system, he said.

“You saw that all the marketing and promotions were not as broad as Windows 8, so to reach this success is encouraging,” Wong said. While Chrome has no license fee, Acer had to spend more money on marketing and promotions, offsetting the cost savings.

Acer will not release any Windows RT devices before the back-to-school season this summer, he said. Acer is still evaluating the platform, Microsoft’s first tablet and PC system compatible with ARM Holdings Plc (ARM) chips, before deciding if it will offer a device.

Smartphones

Instead, Acer plans to build up its smartphone business, raising sales from 500,000 units in 2012 to 1.5 million this year and 5 million in 2014, he said. The company will target specific operators individually instead of trying to offer models across entire markets.

With NT$33.6 billion in cash at the end of September, compared with a current market value of NT$68 billion, Acer isn’t interested in being bought out, Wong said. While the company has no plans to acquire other PC makers, it may consider purchases of technology companies, he said, after its 2011 acquisition of U.S. cloud-services provider iGware Inc.

Acer is rated sell by 15 of 31 analysts polled by Bloomberg, with 15 recommending hold and one suggesting investors buy. The stock is down 4.8 percent this year in Taipei, lagging a 0.4 percent drop in the benchmark Taiex index.

Acer’s NT$3.5 billion writedown of intangible assets for last year comes after it posted a profit of NT$455 million in the nine months to Sept. 30. The writedown means it will post a full-year loss for 2012, Wong said.

The company reported a loss of NT$6.6 billion in 2011.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net.


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