Acer's Vertical Integration And Channel May Offer The Lowest Cost

The few times I've taken a shot at Apple Computer, the letters it generated had me consider getting a bodyguard until the storm settled. But a column I wrote over the summer about my belief that Acer America just may have the wherewithal to be a much bigger player in the PC space prompted an unusual chorus of agreement.

Here's one letter that frankly sums up what most of the other respondents had to say. Responding to my column headline of "Could Acer Make A Run At The Channel?" Rory Sanchez, president of SLPowers, West Palm Beach, Fla., writes, "The answer is: Let's hope so. Although many solution providers simply stopped selling the highly commoditized PC, the bulk of us continue to look for one PC manufacturer that isn't trying to be Dell. We're looking for a company that will ignore the allure of selling direct, embrace the channel, and be ready to 'go to the mat' with us when we're trying to win a deal. By the way, we still have found nothing that compares to the quality of an HP-Compaq ProLiant Server, and we continue to sell those every day (along with some Gateway servers), but almost every PC quote that goes out from my office these days contains the word 'Acer.' "

Sanchez's statement that Acer is making it into more of his solutions isn't lost on Stan Shih, Acer's chairman and CEO. I've known Shih for probably 15 years. He is methodical in his approach and races to win the marathon, not the 100-yard dash.

As CRN Senior Editor Joseph F. Kovar pointed out in the Nov. 8 issue, Shih and Acer President Rudi Schmidleithner have put their company in place to drive 100 percent of its sales through the channel. And in CRN's monthly polls, Acer is being named by an increasing number of VARs as the provider of their best-selling PC.

As I watch the battle for the No. 1 spot in PCs unfold between Hewlett-Packard and Dell, it is becoming clearer to me that Acer is on track to grab a strong No. 3 position. Over time, Acer just may give HP and Dell a run for the No. 2 spot and, eventually, No. 1.

When you peel back the manufacturing process, the Acer story is very different from that of HP and Dell.

HP and Dell both rely on a logistics matrix of contract manufacturers, suppliers and assembly lines in which a great deal of effort is expended finding the lowest-cost part suppliers. Acer, meanwhile, is a vertically integrated manufacturer that builds most of the components itself. Obviously, that can be an advantage in the final price of its finished systems. That is, of course, unless HP or Dell are able to find even lower-cost suppliers. But my bet is that there are very likely to be Acer components inside Dell and HP PCs on occasion.

In any case, my point is that just 12 months ago, it looked as though the PC battle would come down to a continuous tug of war between HP and Dell without another serious contender emerging.

I no longer believe that.

Acer is making steady gains. It is obviously already leveraging its vertical integration and is now focusing on the indirect channel.

The strategy is simple, and I think it will be successful. By concentrating on its manufacturing strength and by outsourcing distribution and sales to the channel, Acer is embracing what, in my opinion, will prove to be the lowest-cost model over the long haul.

Make something happen. I can be reached at (516) 562-7812 or via e-mail at [email protected].