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Nightmare In Round Rock: Acer Closes In On Dell For No. 2 In PCs

Posted by: Peter Burrows on May 07, 2009


Acer’s ambition to be the world’s largest PC maker by 2011 would have been laughable a year ago. But as my colleague Bruce Einhorn recently pointed out in his recent story on CEO Gianfranco Lanci, it’s no laughing matter for PC rivals anymore. In Gartner’s latest quarterly numbers, released yesterday, Taiwan-based Acer saw its global market share grow by more than a third, to 13% of the total market. It’s now neck and neck with Dell for No. 2 (Dell has 13.1%). HP retains the clear lead overall, with 19.8% share, but Acer is growing much faster.

Then there’s Dell. Its shipments fell 17% for the quarter compared to the year before. In fact, First Global analyst Amitabh Goel notes that the other top four PC makers (HP, Acer, Lenovo, and Toshiba) actually had a shipments increase of 10%. In other words, Dell is bearing essentially all the brunt of the economic downturn. Rarely has one company absorbed so much pain for its rivals.

michaell dell.jpg

It’s not likely to get better for Dell, either—not with companyies such as Acer willing to trade profits for market share. It’s a macabre twist of fate for Dell, which during the 1990s used its operating efficiencies to force all of its rivals to run at a loss. Dell made much more money back then than Acer does now, but the effect for Acer’s hapless rivals is the same. They can either try to maintain market share and incur financial pain, or back off and watch Acer take still more share and impose its will on the market to an even greater extent.

Clearly, Dell needs to make some kind of dramatic escape from this trap. Just sticking to its knitting isn’t going to fix things. Neither, evidently, are moves that were once considered radical around the company’s Round Rock, Texas headquarters, such as the company’s decision to start selling at retail stores as well as on its website. That was two years ago.

What’s the answer likely to be? For starters, Dell seems intent on moving beyond Wintel in order to tap markets for new, cheaper kinds of devices. That’s why it has created a cell-phone based on Google’s Android operating system, as I reported in March, and why it evidently is also testing a notebook PC based on Android.

But Android itself won’t save Dell—certainly not if Dell doesn’t come up with truly killer implementations of Google’s easily customized code (As regards the cellphone, so far is not so good; Carriers apparently panned the product, one reason it hasn’t been publicly announced).

Rather, the company may have decided it has little choice than to do a big acquisition. It reportedly is looking to hire a top-flight M&A maven that would report to the CFO (why not to Michael Dell himself, I wonder?). Never mind that the 25 year old company has essentially zero success when it comes to buying and successfully integrating companies. Dell needs to buy its way into some promising growth markets, and do it fast—before its many corporate computing rivals grab all the tasty targets. Clearly, all the big players are jockeying to be far broader, one-stop-shops as the market moves into the cloud-computing era. It will no longer be enough to focus on one of the traditional market segments—that is, computers, networking, storage, software or services. If that fact was lost anyone, Larry Ellison left little doubt by buying Sun.

The price of more inaction could be high. In fact, Bill Whyman, an insightful analyst with International Strategy & Investment, noted in a May 5 report called “ORCL-JAVA AND THE NEW TECH ORDER” that Dell “could end up being acquired.” That would have sounded laughable a year ago, as well.

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Reader Comments


May 8, 2009 04:21 AM

Dell needs to deliver a cool looking Android netbook/tablet, equipped with smartphone electronics to support cell phone calls, location-based apps, etc. (i.e. functionality you can't get with a desktop OS).

Imagine a small device with a touch-optimized UI that has super long battery life AND that allows you to make/receive cell phone calls with a Bluetooth headset, while it sits in your purse/backpack. Add the Android Market for tons of cool apps & you have a winner!


May 8, 2009 04:23 AM

I thought that Michael Dell's move was to go upscale and try it the Apple Way, with better product engineering and higher prices?

William Bell

May 8, 2009 10:08 AM

DELL essentially has become a dinosaur. It's a box mover, trying to move into services, too late. . . . . The company sat on it's hands for too long. It should have divested it's manufacturing assets a long time ago & focussed on innovation. Everything it does is telegraphed.


May 8, 2009 11:22 AM

Acer and Dell need to merge and that will help all stake holders - there is no point going after each other and getting killed! Does that make sense?


May 8, 2009 11:32 AM

It is shocking just how much of these so-called industry experts are so uninformed, and how much of peanut gallery in the reader commments are also just ignorant. Both here in this magazine and elsewhere, all of the analysts have inch-deep knowledge of Dell and the industry but make procalamations as if they've studied it for years.

First - Acer's rise has been largely in consumer systems sold outside the U.S. Take a look around at your coffee shop -who's using Acer?

Second - Dell's strength has always been in commercial systems. When HP began their rise 3 years ago, it was also in the low-price consumer space, mainly in Asia. Now they have parlayed that into some success in the US commercial space, but mostly with a low-cost approach that has begun to demoralize their sales force and had them cut services. Meanwhile Dell is expanding services to its commercial customers.

Throw around your market share numbers all you like, but at least be informed about the companies' strategies. Dell saw the consumer place as an easy place to expand and take more revenue, which it has done, but the consumer space is not its focus. Acer will continue to climb, but at HP's and Toshiba's expense as long as it's with consumer machines. Of course, consumers in India and China will soon have quenched their thirst for PCs and then, with the U.S. recession lifting, it will be the commercial space that is hot again. Look for Dell to ride that wave in the next 6-24 months. Of course, I don't expect the analysts to notice until late 2010 and with the same lack of insight.


May 8, 2009 11:47 AM

Dinasaurs are extinct, my friend. You can't expect a company to keep growing at record pace once it's reached the top or close to the top.

João Silva

May 8, 2009 01:52 PM

I think DELL isn´t interested in market share anymore. They are looking for more profitable markets and they are succeeding...


May 8, 2009 02:34 PM

Boy, Ken must not be too informed or just a good Dell sales person drinking the Kool Aid. No Acer's in the local coffee shops? These are global numbers and obviously the competition is growing faster outside the US.

First, one would realize the future growth of markets is not within the US> Even Michael Dell has mentioned the large growth areas will be AsiaPac and the Indian Markets. Which is exactly why Acer and Lenovo are graining ground.

Unfortunately Dell has not just evolved fast enough and sat on their direct model too long. Hopefully then can transform and be back in the lead once again.

Not sure a smart phone is the best idea. All of Dell's past gadgets never accounted for much and trying to copy Apple's iphone approach will be difficult since Apple has such a cult following and innovate and launch very very quickly.

If Dell's keeps commenting that commerical and corporate is where their revenue's come from? How does a smart phone justify those comments versus key acquisitions for services etc to compete against IBM services or EDS.

Dell a takeover target? Probably not but then again everyone said Compaq would never get gobbled up, nor EDS, or Sun Micro for that matter.


May 8, 2009 04:36 PM

Acer are strong, Acer did'nt become the 3rd largest pc vendor on the planet by accident, they did'nt become the number 1 notebook vendor within EMEA for the last 3 years by accident, they did'nt become the offical sponsor of the 2012 london olympics by chance, they will win, they are focused, passionate and believe that they can win, and so far it seems they are right!!! 100% in-direct,dont bet against them.

Rob Levek

May 8, 2009 09:49 PM

Funny I just ordered a new Dell 760 desktop for my office, with a 22 inch monitor. I actually returned the Dell monitor because I found it hurt my eyes and the colours were off, I then bought an ACER 21.5 inch and love it.
Supporting both companies apparently.
Cheap keyboard and mouse from Dell...


May 8, 2009 10:24 PM

I am from India and I am a loyal customer of Dell, who has always treated the employees well, and has tried to protect the customers they serve. They have also protected suppliers for years. Does anyone on this blog realize that it was a Sony battery that expoded in the notorious Dell laptop? Dell recalled the batteries, and did not smear Sony. I know for a fact that Acer has lower OPEX because they force labor at ridiculous terms, in countries whose alternative job opportunities are bleak, with low pay and no bathroom breaks in your shift. Leo is an Acer employee in England, he can tell you.


May 8, 2009 11:18 PM

Once the markets are up and economy back to good ways than I bet there would be huge demand for Dell.Cheap products dont last long.Acer and lenova should be knowing of that.Patience and profits.

diptej amerkar

May 9, 2009 12:11 PM

ACER is very good, very economical with best features and good quality.


May 11, 2009 10:17 PM

I purchased an acer lap top about 4 months ago and absolutely love it. It was a resonable price and had the features I needed for going back to school. and for my play time as well.


May 12, 2009 09:23 PM

I love my Acer Aspire one 10.1"

It is the best computer I have ever owned

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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