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You’ve got to speculate to accumulate. Everyone knows that, right? Sometimes you can speculate too much and accumulate too little but you very rarely speculate too little and accumulate too much. That hardly ever happens, if ever.
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Of course, if you’re going to speculate, it probably helps if you do it in an area where the prospects of accumulating are at least reasonable.
So what are to make of Acer? The company’s latest results show that third quarter revenue grew by just under 12% compared to the second quarter. However, the contrast with 2014 couldn’t be more marked with consolidated revenue down a whopping 21% year on year. Not that you’d know from looking at Acer’s results announcement which ignores the year on year comparison.
Acer also revealed that gross margin had fallen 2.4% to 8.1% compared to Q2 2015 “due to promotional activities carried out to face strong competition, resulting in an operating loss of NT$704m (US$21.26m)”. Operating income for the same quarter in 21014, again not mentioned in the 2015 announcement, was NT$1.1bn (US$36.27m).
Back in November 2014, Acer was riding high on a 13% growth in PC shipments as a result of “good product mix, new product announcements and back-to-school demand”. The company stated that it expected “the seasonal promotions among its regions to continue the steady growth momentum” in Q4.
Instead, Q4 revenues declined year on year, even if it was by only 0.8%. By Q1 2015, revenues had fallen 11.4% year on year although operating income and profit after tax both improved. Consolidated revenue in Q2 2014 was down 9% on the same period in 2013 but the fall in Q2 2015 was even more spectacular as revenue plummeted by almost 26%. Operating margin was much better, however, resulting in a 34% rise in operating income.
At the announcement of its Q2 results in August this year, Acer said structural changes, effective product mix strategy and expense control would enhance profitability going forward. The Q3 results suggest it may have to go a bit further forward to achieve that goal.
What the Q3 results do show, however, is that speculation in the form of promotional activities didn’t deliver any accumulation for the company in the face of strong competition.
As for Q4, it “will continue to optimise operations to enhance efficiency, and to formulate effective product mix strategies for local markets and seasonal marketing promotions to boost product sales”.
The results sit a little uneasily alongside comments made by Acer CEO John Chen just over six months ago at the top of the new World Trade Centre that Acer would be “the last man standing for the PC industry”. Right now, that looks incredibly optimistic when you consider that Acer’s Q3 global PC market share declined 19.9% according to Gartner and fell by an even steeper 25.9% by IDC’s reckoning.
The company is now in fifth place in the global PC market, behind Lenovo, HP, Dell and Apple. The only bright spark is that both IDC and Gartner expect the market to stabilise and improve going forward. Whether Acer will do the same remains to be seen.