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Acer Tumbles After Audit Finds ‘Abnormalities’ in Inventory, Receivables

Acer Inc. (2353), the world’s second-largest maker of laptops, tumbled the most in more than 13 years in Taipei trading after the company said an audit found abnormalities in its inventory and account receivables.

The shares fell by the daily limit of 7 percent to NT$51.90, pushing the stock past Lead Data Inc. (2443) as the worst performer on the island’s benchmark index this year.

The findings, which will result in a $150 million one-time charge, further undermined investor confidence in a company that had cut its sales forecast twice and ousted its chief executive officer since late March. Last quarter, Acer posted its lowest profit in six years after the company lost sales to Apple Inc. (AAPL)’s iPads and HTC Corp. (2498)’s smartphones.

“This is obviously a mismanagement issue,” said Jenny Lai, an analyst at HSBC Holdings Plc. (HSBA) in Taipei. “It will be a challenge to regain investors’ confidence, especially since the company changed its financial forecasts a few times in the past couple of months.”

In its audit of the operations in Europe, the Middle East and Africa, Acer found “abnormalities” in inventory stored in freight forwarders’ warehouses and in account receivables in Spain, according to the company.

Regaining Trust

“These are necessary measures to get the company back on track and regain investors’ trust,” Vincent Chen, an analyst at Yuanta Securities Co., said in a report today. “Potential risk remains with Acer’s tablet inventory in the third quarter.”

Wang and the rest of the board of directors’ compensation will be slashed by 50 percent and the company will propose cutting employee bonuses by 40 percent, it said. Acer also plans to eliminate 300 jobs in Europe, the Middle East and Africa.

Acer’s share price will remain “under pressure,” according to Goldman Sachs Group Inc. (GS), which advises investors to sell the stock.

“At Computex 2011, Acer attracted fewer visitors compared to Asustek Computer Inc. (2357) and had fewer new products on display,” Henry King and Angel Wei, analysts at Goldman Sachs, wrote in a report today in reference to this week’s electronics conference in Taipei. “Without a strong product, we think Acer’s recovery could take longer than the market expects.”

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.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net; Young-Sam Cho at ycho2@bloomberg.net

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