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Digitimes Insight: Acer needs new business model for mobile devices
Joseph Tsai, DIGITIMES, Taipei [Friday 1 April 2011]

Facing fierce competition in the mobile device market, Acer has decided to replace its CEO and president Gianfranco Lanci. The company may not have to completely abandon its existing strategies of giving more emphasis on marketing than on product R&D because of Lanci's departure. But it definitively must devote more efforts to mobile devices and establish a new business model that leverages its current advantages.

Most of the PC brand vendors had a slow start in the tablet PC market. But compared to Hewlett-Packard's (HP) acquisition of Palm, and Dell's and Lenovo's acceleration in unveiling their products, Acer's pace is slower than most of its competitors. Acer tried to establish a place in the LCD TV and smartphone markets, but failed. Lanci has to be held responsible for the failure to expand Acer's product lines.

@@However, Lanci's departure may pose a risk to Acer, as the regions that contribute 70% of Acer's revenues are still managed by executives close to Lanci. Whether these executives will continue to stay loyal to the new Acer leadership in JT Wang will strongly affect the company's performance for the rest of 2011. In addition to these internal issues, whether Europe's channel retailers, which have strong relationships with Lanci, will continue to support Acer and not defect to Acer's competitors, is also an uncertainty.

Acer's strong growths in the past 10 years were mainly driven by the expansion of shipments to regions outside Asia Pacific and Western Europe, where Acer was already strong. Acer also managed to expand its market share in Asia Pacific and Western Europe.

But in terms of products, the PC and monitor businesses account for almost all of the companies, while other product lines share only less than 5%. Its major competitors HP and Dell have both achieved strong results from the enterprise software, storage and service markets.

Mobile device technologies have see fast development in the past two years and have already started impacting the notebook market, forcing the notebook market to enter the initial period of the mature phase. But the smartphone and tablet PC markets taking off fast.

PC and smartphone brand vendors have their own advantages in the tablet PC market. But in terms of supply chain resources and business models, PC brands are in an disadvantaged position. PC brand vendors will have to establish a new strategy for the tablet PC and mobile device market

A comparison of the top-three PC brand vendors' strategies for tablet PCs shows that HP, which acquired Palm in 2010, is expected to be the most qualified players to compete in the next-generation mobile device battle.

Dell's strategy is to heavily cooperate with its ODM partners and is willing to try out many different options for its devices to find the best solutions. Although the result is not yet obvious, the strategy should allow the company to have a better understanding of the market and its brand new supply chain.

Acer has been focusing on R&D for smartphones after acquiring Eten. But compared to other smartphone brand vendors' investment in R&D, Acer's spending has been far less. Without improvements in revenues from the segment, Acer has been faced with the dilemma of whether it should rely on ODMs the smartphone development to save cost, or to invest in developing its own technologies.

Global mobile device shipments, 2013 (m units)

Segment

Volume

Notebook

250

Tablet PC

130

Smartphone

800

Source: Digitimes Research, compiled by Digitimes, April 2011

PC and smartphone vendors' advantages in tablet PC competition

Hardware design

Software design

Key component

Manufacturing ability

Control over IT retail channel

Relationship with telecom carriers

PC vendors

Better

Better

Smartphone vendors

Better

Better

Better

Better

Source: Digitimes Research, compiled by Digitimes, April 2011

Acer's CEO and president in different regions and 2009 revenues

CEO and president

2009 revenues (NT$b)

2009 revenues share

American market

Emmanuel Fromont

153.25

26.1%

Europe market

Walter Deppeler

294.78

50.1%

Asia Pacific market

Steven Lin

107.21 (including China)

18.2%

Taiwan

Scott Lin

32.52

5.5%

China

Oliver Ahrens

N/A

N/A

Source: Digitimes Research, compiled by Digitimes, April 2011