Acer works to maintain lead in competitive PC market

By Jack Narcotta, Technology Business Research senior analyst

Next@Acer showcased Acer's PC legacy as an innovator, but larger PC OEMs with clearer strategies are potent threats

Acer's annual Next@Acer product event serves as a showcase for its newest PCs and its risk-friendly approach to product and form-factor design. Acer seeks to leverage its new premium-centric devices to rise above lingering customer perception that it is simply a low-cost PC manufacturer.

At the 2016 event, Acer highlighted plans to target specific areas of the global PC market, including filling a gap in the 2-in-1 market left by premium PCs from Dell, Lenovo, HP Inc. and Microsoft with its Switch Alpha 12; establishing a greater presence in the $700 and higher price band with its Aspire S 13; and introducing a gaming and virtual reality combination with the Predator G1.

TBR believes the new PCs announced by Acer, particularly Switch Alpha 12 and Aspire S 13, better equip the company to compete against mid-range-priced, premium devices from Dell, HP Inc. and Lenovo.

However, the Intel processor upgrades, longer battery life and unique 2-in-1 form factors touted by Acer have become mainstream features for most PC OEMs. Differentiation in a competitive, shrinking global PC market requires more precise execution across all price bands and form factors.

A limited portfolio compared to those of larger OEMs has not limited Acer significantly in consumer PC markets, its strongest segment. However, TBR believes the lack of a cohesive approach to the PC market in favour of focusing on discrete devices or price bands places Acer at a disadvantage.

Innovations such as liquid-cooled notebook PCs, hardened Chromebooks and Windows-based notebook PCs are differentiators but limit appeal to a narrow segment of the market. Larger vendors, keen to gain market share, could easily outmuscle Acer in these categories.

Expanding the role of services and software in its PC business, a strategy Acer embraced in 2014, and exploring opportunities in PC as a Service or managed PC services for SMBs and midsize customers would deflect some of the competition. Acer's scale and comparatively limited resources, however, are limiting its ability to overtake Dell, HP Inc. or Lenovo in these markets.

Realigning to changes in market conditions has protected Acer's business but complicated its long-term strategy

Acer's penchant to reorganise itself in response to market conditions has enabled it to remain among the top five PC companies globally; however, its frequent transformation risks negating much of the momentum it intends to generate with its new devices.

A PC portfolio that strikes a balance between performance and cost-effectiveness keeps Acer entrenched in entry-level and midrange consumer PC segments, but its small scale hinders its ability to compete in traditional premium PC segments that would generate greater revenue and stronger margins for the company.

Acer's success in gaming PCs, where it is No. 1 in market share in many EMEA and APAC countries, creates loyalty among gaming enthusiasts, but the gaming market's niche status hinders its ability to generate a positive halo effect in support of Acer's traditional PCs.

Acer has been operating at a near-breakeven operating profit for the past two years, with revenue declining consistently year-to-year each quarter, highlighting the degree to which the company must precisely execute on this new initiative to transform the company.

With Acer set to celebrate its 40th anniversary in September, the PCs announced at Next@Acer illustrate the company's legacy as a PC innovator and build on its heritage as a product design maverick. However, stronger competition from larger vendors in a shrinking global PC market highlights the business challenges Acer faces as its devices enter the market in mid-2016.

Technology Business Research (TBR) is an independent technology market research and consulting firm specialising in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators.