Acer Cuts Netbook Expectations, Points to Revenue
Acer pulls back its 2009 netbook shipments forecasts by several million, after reporting a disappointing first quarter. The Taiwan computer maker points to the issue of revenue. Is the problem Acer's exclusively, or are netbooks' low prices truly eating away at profits?
Acer, the world's third-largest computer maker, has cut growth forecasts for its netbook PCs, after coming up short on analyst expectations for the first quarter of 2009, Reuters is reporting.
Acer reported a net profit of $60.3 million for the first quarter, a fall of 31 percent from a year earlier, and cut 2009 netbook forecast shipments from 12 to 15 million down to 10 to 12 million.
"Revenue is one of the major problems," said Acer CEO Gianfranco Lanci, according to Reuters. "If you look at Europe or the U.S., most computers come for below $699, and we don't think that price will climb soon."
Lanci reportedly went on to say that netbooks, and a new range of ultra-thin notebooks occupying a space between netbooks and more traditional laptops, will dominate the PC market.
With PC sales falling in a struggling economy, netbooks, with their more manageable price tags, have prevented shipment numbers from dipping too drastically.
However, their low prices have been said to be "cannibalizing the mobile PC market" by destroying margins.
Their low costs have even enabled carriers to begin applying smartphone pricing strategies to them. AT&T, for example, has offered select markets a netbook for $49.99, with the purchase of its monthly mobile broadband plan.
Is Acer a victim of falling prices?
"Well, I think they also had some challenges with screen sizes," says Richard Shim, an analyst with IDC. "They had 8-inch screens when the market had moved to 10 inches."
Shim says the cannibalization rate-or, the rate at which the netbook market is eating at notebook profits-is at 15 to 20 percent. "Cannibalization isn't as big a factor as some would suspect," he told eWEEK.
Additionally, Shim expects the market share for mini notebooks, or netbooks, will hold at 15 percent.
Shim explains that three factors are contributing to declining ASPs (averaging selling prices). The first is that ASPs have always declined. The second is the impact of the economic crisis, leading OEMS to lower prices in order to increase volume. And the third factor is that netbooks have reset customers' pricing expectations.
"ASPs going down, however, is only sustainable if volumes go up," says Shim. "You can't sustain a market with both arrows pointing down. ... There's going to have to be a squeezing of margins and consolidations."
The latter, he said, could mean "players merging, being acquired or disappearing."
Acer PC rivals Compal Electronics also reported a profit decline for the first quarter, while Quanta reported a 10 percent increase in first-quarter net profits.