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Acer to shift its focus towards increasing profit margins

Acer to shift focus on increasing profit margins
Acer to shift focus on increasing profit margins
The Taiwanese company made popular by its budget computers may soon focus less on sales volumes and more on high-end hardware.

As one of the top worldwide computer manufacturers, Acer has become the household name it is today by focusing on high shipment of low-cost laptops and PCs. Unfortunately, the Taiwanese company has been missing its profit targets for the past two quarters, and now that CEO Gianfranco Lanci has stepped down, Acer could be leaning towards a new market strategy more focused on maximizing profit margins instead.

Acer’s problem is that it is commonly perceived as a brand that competes on price, and that doesn’t help profitability,” said analyst Simon Ye. According to Bloomberg, Acer is inspired by the business models of Apple and HTC as these companies thrive by maximizing profitability instead of focusing on budget hardware. For example Bloomberg reports Apple had a 21.5 percent profit margin in its last fiscal quarter compared to Acer’s 2.3 percent. Likewise, Acer could one day start relying on high end hardware in order to increase its margins and meet quarterly targets.

The Taiwanese PC maker is realigning its business to focus on profitability, instead of sales volumes,” spokesman Henry Wang explains. Bloomberg notes that Acer’s reliance on high sales volumes is currently hurting the company as iPads and other tablets have been giving consumers great alternatives to low-end laptops and netbooks. Acer may be forced to shift its focus away from netbooks such as its popular Aspire One series if tablets continue to eat away at netbook sales.

Fortunately for Acer, the company offers tablets of its own including the Iconia tablet, some of which will be releasing this year for AT&T and Verizon in the U.S. “There is good consensus among the board members that the tablet is the way to go,” said Acer spokesperson to Bloomberg. Of course, Acer will have a long way to go before it can catch up to the quality brand image of Apple and HTC if it intends to dramatically shift its business strategies.

Source(s)

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Author: Allen Ngo, 2011-04- 2 (Update: 2012-05-26)