CRN Interview: Stan Shih, Acer

Last week, Senior Editor Joseph F. Kovar spoke with Stan Shih, founder of the Acer group of companies and a key player with the worldwide IT industry, during the Computex exhibition in Taiwan. Acer Chairman and CEO Shih, who plans to retire this year, shared his company's strategy for expanding its U.S presence.

CRN: Are you ready to retire?

Shih: At the end of [the] year 2000, we transformed Acer [into two separate companies], and there were some concerns I might have to retire with regret. The timing was already decided, but I couldn't turn Acer into a more competitive [company]. To survive was not a big task, but to become a winner, I think, was a question at that time.

CRN: What problem were you facing?

Shih: We were losing our competitiveness. The ODM (original design manufacturing) business we lost to Quanta and Compal. And in the brand-name business, we were losing money in the [United States] continuously, and not doing [well] in Europe. Although in Asia, we were always making money.

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So, brand name was in doubt and ODM was losing its competitiveness. So we made a transformation to split Acer and [our ODM business unit] Wistron. That helped.

CRN: Was there a single event that made you realize everything was OK?

Shih: Oh no, it was very slow. For example, in the brand-name business, we got better and better. Then in the second quarter of 2002, it was the first time in many, many years the U.S. operation broke even. That was a major achievement.

The other regions already were making profits. But in the [United States], we continued to scale down. We needed to keep some reasonable size because we were looking to come back.

Our main direction was to try to develop a winning formula, or a new business model. The right way to do business. The winning formula we found was in Europe, where we were very competitive.

So at the end of 2003, we transferred a European executive, Rudi Schmidleithner, to the [United States] to manage there. We tried to duplicate the European formula.

CRN: What is he doing different?

Shih: Because in the past we were focused on small distributors, or tried to approach education and some vertical applications like health care, it looked like we had some markets. But always, from the return-on-investment point of view, it wasn't good because it wa-sn't a simple, focused model.

The [new] focus is to just support the distributor. A two-tiered distribution model is our only model. In the past, we had [offerings such as] Shop Acer. It was confusing.

Right now, the Europe model is very simple and reduces our overhead. It keeps room for our distributors to help us to serve our big number of dealers and VARs. We minimize the inventory. So from the price-competitive point of view, it was good. From the new product-introduction point of view, this helps us keep competitive in the PC business.