Acer Founder Returns to Lead Computer Maker After Record Loss

Acer Founder Returns to Lead Computer Maker After Record Loss

Acer Inc. (2353) founder Stan Shih returned to the company he started in 1976 after a record loss and the resignation of leaders he’d entrusted with its management. Shih returns as chairman without a salary while Jim Wong, president since 2011, resigned his post and will not take up the role of chief executive officer vacated by J.T. Wang, Acer said in a statement yesterday. The company said Nov. 5 Wong would become CEO while Wang would remain chairman until June.Shih’s return, nine years after his retirement, marks the culmination of Acer’s ascent and fall as a global PC powerhouse that saw it eclipse Dell Inc. and Hewlett-Packard Co. to be the world’s biggest notebook maker. Its revenue peaked at the end of 2009 as the introduction of Apple Inc.’s iPad and the global financial crisis crimped spending on computers.

Under Wang, and then-President and CEO Gianfranco Lanci, Acer spent more than $1.3 billion to buy competitors including Gateway Inc., Packard-Bell and eMachines, helping it become the largest laptop company by the first quarter of 2010.

On Nov. 5, the company announced it wrote off NT$9.94 billion ($336 million) from five purchases, adding to a NT$3.5 billion asset impairment it announced in January, and taking the value of write-offs for acquisitions to more than $450 million, according to Bloomberg calculations.

Its NT$13.1 billion loss for the third quarter is almost double the loss it posted for the entire 2011.

Consumer interest in tablets, sparked by Apple’s introduction of the iPad, hurt demand for Acer’s own laptops and spurred it to its first loss in a decade in 2011. The company wrote down $150 million because of excess inventory, while Lanci resigned in a dispute over future development and strategy.

Co-founder George Huang will also return to the management team, Acer said yesterday.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

November 21, 2013 5:01 pm

Taiwan’s Acer struggles to redefine its niche

By Sarah Mishkin in Taipei

More video

The travails of Taiwanese PC maker Acer are on clear display in the neon-lit alleyways of the Guanghua electronics market in downtown Taipei.

“If you want to save money you can buy Acer,” says the shopkeeper of one small store whose façade is covered in lime green Acer ads. Most others, she says, are drawn to Asus, another Taiwanese brand, whose notebooks are more expensive but whose “appearance is more beautiful”.

Next door, a store clerk named Steven says Acer’s notebooks are not cheap enough to make up for how heavy they are.

“Right now, not too many people want to buy them, so you can see on this street there are more Asus stores,” he says.

Sentiments such as those help explain why Acer has been pushed to shake up its top management twice this month.

Three weeks ago it announced that its long-time chairman and chief executive JT Wang would retire, to be replaced as chief executive by Jim Wong, then corporate president. On Thursday evening, it changed course to announce that the board had “reluctantly accepted” the resignation of both Mr Wang and Mr Wong, and that Stan Shih, Acer’s founder, would rejoin as chairman and interim corporate president, with the CEO position eliminated.

Those shake-ups follow Acer’s record loss in the third quarter, reported earlier this month. Its sales have been pummelled by both the overall shrinking of the PC market and its own sliding share of that market.

Whether Mr Shih, who founded the company 37 years ago, can turn it round remains unclear. Acer needs to find its niche in a shrinking market, or invest enough in innovation that can help it break into still-growing markets, such as tablets or corporate computing systems.

Working in Mr Shih’s favour, said Vincent Chen of Yuanta Securities in Taipei, is that he commands enough respect as the company’s founder to push through difficult or controversial decisions, but many are pessimistic about this second unexpected shake-up.

“This is clearly a surprise,” said one analyst in Taipei. “The writing’s on the wall . . . there are not many options out there.”

Overall PC shipments fell 8.6 per cent year on year last quarter, according to market researcher Gartner. Acer’s shipments fell more steeply – down 22.6 per cent, driving its market share from 9.8 per cent to 8.3 per cent.

This is clearly a surprise. The writing’s on the wall . . . there are not many options out there

– Taipei analyst

All PC companies are struggling as consumers spend money on new smartphones and tablets instead of PCs. Some, such as Lenovo, have been able to offset that with steady sales to corporate clients or, in Dell and Hewlett-Packard’s case, sales of consulting services.

Acer, however, has historically focused on selling low-frills computers to consumers, making up their low profitability with large volumes.

Margins in the consumer PC business have become so tight that US companies are likely going to pull back from it, leaving only Asian brands more familiar with low margin work, Jerry Shen, Asus’ chief executive, said recently.

Acer’s situation, however, is not hopeless, says Alberto Moel, an analyst with Bernstein, the brokerage.

Unlike a company like BlackBerry where failure to keep with innovation led consumers to nearly entirely abandon its platform, Acer recognised the importance of consumers’ desire for new devices like tablets. “They just didn’t have the resources and capability and the ability to execute,” he said.

The question now, Mr Moel says, is whether Mr Shih will be able to change that by marshalling the resources needed to launch products that can stand out, or find a new business model that better fits the challenging market.

November 21, 2013 11:44 am

Second Acer chief executive in a month resigns

By Sarah Mishkin in Taipei

PC maker Acer has shaken up its top management for the second time this monthby announcing that its newly appointed chief executive officer will step down in favour of one of the group’s founders.

Stan Shih, who founded Acer in 1976 but retired from it in 2004, will step in immediately as the group’s chairman and interim corporate president to help turn it around as the Taiwanese company struggles with deepening losses and the continued shrinking of the global PC market.

The return of the 68-year-old Mr Shih is a dramatic departure from the management changes Acer had announced earlier this month, in which JT Wang, now chairman and CEO, would retire in the next few months and be replaced by Jim Wong, current corporate president. Both of those men have instead “stepped down in light of the company’s recent performance”, the company said in a statement.

“This is really a drastic change, but in a nutshell it means Stan Shih is really determined to see a change,” said Vincent Chen, an analyst with Yuanta Securities in Taipei.

The company has already announced a 7 per cent headcount reduction as it tries to catch up with a technology market that has moved away from PCs and towards smartphones, tablets and, more recently, wearable devices. Mr Shih’s reputation and the fact that he is the group’s second largest shareholder with 2.64 per cent of outstanding shares means he will be able to push through tough changes that other executives might have struggled with.

This includes, potentially, being acquired by another company, said Mr Chen. “Just in case it will be a really drastic decision, he’s the man to take that shot,” he added.

Many analysts and technology executives, however, question what options remain open for Acer.

It is the world’s fourth largest PC maker by sales, according to market researcher Gartner, but the company has been criticised for underinvesting in research and development. That has made it difficult for it to compete with rivals like Lenovo which have been releasing new kinds of PCs, such as those with detachable screens to become tablets.

Acer shares are down 38 per cent in the year to date. In the third quarter it reported a loss of $442.19m as revenues fell 11.8 per cent.

November 22, 2013

Acer’s New Chairman Follows a Familiar Tech Path

By ERIC PFANNER

TOKYO — Another computer entrepreneur has returned to lead a company that he founded after it fell on hard times.

Acer, the Taiwan-based personal computer maker, said late Thursday that it had named a familiar face as its chairman: Stan Shih, who was a co-founder of the company in 1976. Among founders who have left and returned, Mr. Shih joins Steven P. Jobs at Apple and Michael Dell at the company that bears his name.

At Acer, the challenges look especially daunting. PC sales are slumping as consumers turn to smartphones and tablets, and Acer has struggled with the transition. The company recently announced a big quarterly loss and said it would cut its work force of 8,000 by 7 percent.

The announcement of Mr. Shih’s return also marks the second management shake-up this month. A little more than two weeks ago, the company announced that another executive, Jim Wong, would take over as chief executive, replacing J. T. Wang. At that point, the company said that Mr. Shih would serve on an advisory committee to help the company with strategy.

In the latest changes, the company said both Mr. Wong and Mr. Wang will step down, though they will remain advisers to the company. Mr. Shih will serve as interim president until the “appropriate candidate” is found, Acer said in a statement.

One person briefed on the situation, speaking on condition of anonymity to protect business relationships, said that Mr. Shih had hoped all along to retake the helm, but first had to overcome internal resistance.

Mr. Shih, 69, said in a statement distributed by Acer that he would work without pay.

“Due to the situation that now faces Acer and my personal social responsibilities, I must stand up and take the reign without salary,” he said in the statement.

Analysts say it could be difficult to turn around the company, given the continuing decline in PC sales. Gartner, a research firm, predicts that global sales of desktop and notebook computers will decline to 303 million this year from 341 million in 2012, with a further drop to 282 million next year.

Acer has struggled to diversify into mobile devices. Mr. Shih has said that this is where he intends to focus the company’s efforts.

“Smartphones are very competitive, but in tablets they might have a chance,” said Arthur Liao, an analyst at Fubon Securities. “If they gain market share in tablets, then they can see if they can do it in smartphones.”