What's Behind Acer's Q2 Loss?

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Acer posted a loss for its second quarter, citing higher memory costs and larger research and development investments.

The Taipei, Taiwan-based PC vendor's loss was $19.4 million for the quarter, while Acer's revenue fell 18.9 percent year over year to $6.02 billion.

Acer attributed the loss to its increasing investment in product design and a spike in DRAM prices, which the company said negatively impacted its gross margins. The company also is struggling in the slumping PC market.

According to research firm IDC, Acer holds nearly 8 percent of the world's PC market share and 3 percent of the world's tablet market share. But the PC market has continued to decline this year; both IDC and Gartner reported steep, double-digit drops in worldwide PC shipments for both the first and second quarters this year.

IDC reported Acer's PC shipments fell 32 percent year over year in the second quarter, the biggest PC drop reported among the world's top five PC vendors.

As far as the company's R&D investments, Acer said it's putting more money into innovative product designs and user experiences, particularly around touch screens.

Acer Chairman and CEO J.T. Wang said the company is committed to building "a solid foundation for long-term sustainability and prepare for future opportunities," including smartphones and tablets.

"We strongly believe we are [moving] in the right direction," Wang said.

Larry Gold, President of Mendon, Vt.- based Acer partner Computer EZ, said the solution provider has seen success with Acer because of its competitive price points for small-business customers.

"We consider the [Intel] Core i3 processor a minimum standard for a business-class desktop," he said. "When I shop through distribution and the channel for inexpensive business-class desktops, [Acer] seems to have a number of machines that are available."

But Gold said he does not see Acer keeping up with the Ultrabook and convertible tablet-notebook trend as he sees Lenovo, Asus and Hewlett-Packard making at least a partial transition.

Acer has teased a prototype of a 21.5-inch all-in-one desktop to run on Android, with an expected fall release date, but Gold is skeptical it will be well received in the enterprise market.

"It's hard to believe that the all-in-one with Android is going to be a big seller only because in the desktop market, I have a feeling people are looking for Windows," Gold said.

"It could be wonderful if people are willing to live with a desktop that looks like a smartphone. It could be early yet; it may be ahead of the market," he said.


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