Acer posts record Q3 revenue, forecasts big netbook growth

Acer would have done even better had it not been for shortages of some key components

Acer reported its best quarterly revenue ever on Friday, and forecast even better times ahead.

The results come after a string of successes for the company and highlight how far it has come in a short time. Acer was named the world's second-largest PC vendor by market researchers Gartner and IDC after it shipped 2 million more computers than Dell in the third quarter. Gianfranco Lanci, the Italian CEO and President of Acer, was even awarded an Economic Medal of honor by the Taiwan government early this week for his part in building the Taiwanese company into a global name.

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Acer's revenue in the third quarter rose to NT$167.6 billion ($5.2 billion), a historical high and up 5.3 percent from last year. Net profit increased 14 percent to NT$3.47 billion ($107.8 million). The company would have done even better had it not been for shortages of some components, Acer executives said.

In terms of revenue, Dell remains far larger than Acer. Dell reported revenue of $12.76 billion in its most recent quarter, which ended July 31. The U.S. company sells a wider variety of products and services than Acer.

Acer's strong performance in the third quarter also highlights the transition of personal computers to low-cost, low-margin devices, making cost reductions even more important for PC vendors as computers become low margin household items similar to refrigerators or washing machines.

The Taiwanese PC vendor pointed out this trend last year as a major reason for its purchases of PC manufacturers Gateway in the United States and Packard Bell in Europe. The company hoped to build a stable of brands that end-users know and trust.

"The multibrand strategy at Acer is working very well," said J.T. Wang, chairman of Acer, at the company's investors conference in Taipei. "We gained market share and we maintained our business model."

Netbooks, mini-laptops with long battery life, have been part of that success.

The company estimates sales of the devices could reach 40 million units next year, after hitting 25 million to 30 million this year. "The U.S. is by far the best country in the world for the netbook," said Gianfranco Lanci, president and CEO of Acer, at the conference. Europe is probably second, he said.

The entire PC industry is undergoing a revival, Lanci said. Desktops returned to slightly positive growth from a drop and notebook sales are up. Next year, laptop sales will return to 25 to 30 percent year-on-year growth, he said.

"I think it's clear that demand is back," said Lanci.

The Acer executives noted price and battery life as two of the most important considerations for those buying new devices.

They also noted end-users have been disappointed by the thin, light laptops popularly referred to as CULV laptops due to the Intel CULV (consumer ultra low voltage) chips inside them.

CULV laptop users like the long battery life and thin size but don't like the slow speed, said Wang. "We didn't pay enough attention to that," he said. "End-users will not compromise on this low speed problem."

Acer will announce new laptops in the first quarter to rectify this problem. "This time we should be able to do it right," he said.

Mobile computers such as laptops and netbooks are a specialty for Acer. Such devices accounted for 73 percent of its revenue in the third quarter. Most of Acer's revenue comes from Europe, which accounts for 59 percent, with 21 percent from the United States, while the Asia-Pacific region made up the majority of the rest, including 5 percent in China.

The company's notebook and netbook shipments will likely grow 10 to 15 percent in the fourth quarter compared to the third, said Lanci, but could drop back by 15 percent quarter-to-quarter in the first quarter.

In smartphones, a new business for Acer this year, the company remains on track to sell 10 million units by 2012.

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