Acer Exploring Acquisition of Software Developer, Chairman Says

Acer Inc. (2353)’s chairman said he’s close to deciding whether to buy a software developer that would boost the appeal of its products as Taiwan’s biggest computer maker seeks to revive investor confidence and earnings growth.

The company has narrowed the search to one to two overseas candidates, Chairman and Chief Executive Officer J.T. Wang said. It’s seeking a software developer that would help make Acer’s personal computers, smartphones and tablets more compatible with each other, he said, declining to provide details such as names or how much it’s prepared to spend.

“We understand we have to make a decision soon,” Wang, 56, said yesterday in his first interview since Taipei-based Acer ousted CEO and President Gianfranco Lanci, who clashed with the board over corporate strategy, at the end of March. “We need some software that can create better value.”

Acer, losing sales to Apple Inc. (AAPL)’s iPad and HTC Corp. (2498) smartphones, aims to transform itself from a volume-driven maker of commodity computers to a developer of products that can command a wider margin. Profit last quarter tumbled to the lowest in more than six years.

Acer’s stock, the worst performer among the five biggest computer makers, slid 0.2 percent to NT$53.5 in Taipei today. The shares have tumbled 41 percent this year after the company missed its sales guidance for two straight quarters and posted its lowest quarterly profit since 2004.

“I don’t believe they can rely on tablets to sustain growth,” said Calvin Huang of Daiwa Securities Group Inc. in Taipei, one of the 17 of 27 analysts surveyed by Bloomberg who recommend investors sell the stock.

Lanci Clash

Wang denied comments from ex-CEO Lanci that Acer is unwilling to hire more engineers or fears any “de- Taiwanization” of the company. Acer expects to hire hundreds of engineers this year, though fewer than 1,000, in addition to the current 1,000, Wang said.

Wang and Lanci last met March 28 in a 90-minute meeting at the Le Meridien hotel in Taipei, where the two agreed terms of the Italian executive’s departure, the two men said. Lanci’s departure was announced three days later, ending his 14-year career at the company, the final three as CEO and president.

Wang said Lanci didn’t adequately handle the “paradigm shift” caused by the iPad. Lanci, in a separate interview, said he suggested as early as June -- two months after the first iPad went on sale -- that Acer develop tablets and the company was slow in delivering them.

Smartphone Market

Acer would have captured a greater share of the smartphone and tablet markets if the company hired engineers outside Taiwan, paving the way for sales to climb 50 percent over five years to $30 billion by 2015, Lanci said. Based on Lanci’s strategy of designing too many products through too many phone operators, the sales target would be “totally impossible” to achieve, Chairman Wang said.

The company is considering boosting its next dividend payout ratio to compensate for the drop in profit expected this year, Wang said.

Unlike with smartphones, where Acer waited until 2009 to enter the market, the company can still gain a foothold in touch-screen tablets because the industry’s sales model is different and retailers are eager to find alternatives to the iPad, which has faced shortages, Wang said. Sales through Best Buy Co. stores in the U.S. of its first tablet, the A500, surpassed expectations, he said, without providing details.

Retail Strength

“Smartphone is majority through telecom, while tablet is majority through the retail chain, and we have much better relationships and cooperation through retail,” Wang said, reiterating a plan to sell as many as 7 million tablets this year. “If I can get 15 percent of sales from touch phones and tablets in the fourth quarter, that would be a great success.”

Microsoft Corp. (MSFT)’s Windows 8, due next year, will renew market interest in laptops because improvements in boot-up times, Internet connectivity and touch-screen functionality will help Apple’s rivals catch up to the iPad’s ease of use to enjoy media content, while providing the convenience of computers to type documents and longer e-mails.

“They’ll count on Microsoft to turn things around with Windows because Microsoft is the only hope for PC companies,” Daiwa’s Huang said.

Acer vaulted past Lenovo Group Ltd. (992) and Dell Inc. (DELL) to become the second-largest maker of personal computers in 2009 after a three-year buying spree that resulted in the purchases of Gateway Inc., eMachines Inc., Packard Bell BV, and Founder Technology Group’s PC business. Acer slipped to No. 3 last year.

Wang said he’ll focus on developing new products rather than acquisitions to return Acer’s sales growth back to “double-digit” percentages.

“I am trying very hard, but don’t say that I promised,” Wang said.

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

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.