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Megan Fox and Cupcake-Baking Jack Bauer Are Still No Match for PC Geeks

May 08, 2013

Megan Fox Stars in Ad Campaign for Acer

Acer has been spending big on stars such as Megan Fox and Kiefer Sutherland to promote its products. Source: Acer

To any outsider, Acer and Asustek look barely distinguishable.

Both are based in Taipei, Taiwan. Both started as contract PC manufacturers for the likes of IBM, HP and Dell. And both spun off in-house manufacturing units to focus on building their own brands of desktop and notebook computers.

Yet look at their growth trajectory over the past few years and the difference starts to become apparent, with Asustek charting a slow and steady rise, and Acer a continuous slide.

Once the world's No. 2 PC vendor behind HP, Acer's market share tumbled 21 percent last quarter to 8.6 percent of global shipments, according to Gartner, relegating it to fourth. Asustek, with few claims to fame beyond the fact it started the whole netbook trend five years ago, gained share in a slowing market and stands one rank behind with 6.8 percent.

Earnings reports for the two companies released this week paint the picture in more clear terms. Asustek sales grew 16 percent from a year earlier to surpass Acer's, which fell 19 percent.

More telling is the fact Asustek's operating income, the fancy term for profit made from its main business, was 192 times bigger than that of its crosstown rival after Acer barely crawled back into the black following a huge loss the quarter before.

How such a stark difference can occur between two companies with similar pedigrees comes down to priorities.

While Acer's been spending big on the likes of actor Kiefer Sutherland, model Megan Fox and DJ Tiesto, Asustek's put its money into the geeks that actually design and build the devices. Since Asustek spun off its manufacturing unit three years ago, it has consistently outspent Acer on RD, despite lower sales for most of the period. As a percentage of revenue, Asustek's RD budget has averaged about five times that of Acer.

And if the numbers aren't convincing enough, Acer Chairman J.T. Wang's own words should do the trick:

“In the product development stages, we will place marketing ahead of RD and design,” Wang said in an August statement announcing the appointment of a new marketing chief.

So while Acer has been busy teaching Jack Bauer to bake cupcakes and bringing out Megan Fox's inner marine biologist, Asustek's geeks have been hard at work experimenting with leather and bamboo to make their notebooks stand out from the crowd and toiling away with Google's geeks to come up with products like the Nexus 7, a 7-inch Android device that helped the Taiwanese company surpass and Microsoft to become the third-largest tablet vendor, one of the few categories of the computer market that's actually growing.

For Acer, the message is clear: As long as rivals are hiring engineers to design and make better products, falling sales and market share is a problem that won't be solved in 24 hours.

(Corrects Acer market share to 8.6% in fourth paragraph.)

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