Strong Acer tipped to oust Lenovo from No3 position

PUBLISHED : Tuesday, 15 January, 2008, 12:00am
UPDATED : Tuesday, 15 January, 2008, 12:00am

Mainland rival sees shares drop on weaker IT spending

Taiwanese computer maker Acer, bolstered by key corporate acquisitions in the United States and Europe, will overtake mainland information technology giant Lenovo Group as the world's third-largest personal computer supplier, despite the latter's recent push into the international market with new, consumer products.

'I expect Acer will be in third [position],' said Loren Loverde, a director of worldwide personal computer tracker programme at US-based analyst firm International Data Corp, which is due to announce its year-end estimates of that market later this week along with global research group Gartner.

Lenovo, which had been the world's No3 supplier since buying IBM's personal computer division in 2005, saw its share price dented last week on fears of weaker information technology spending because of a US recession and its growing domestic labour costs.

Hong Kong-based brokerage house CLSA last Wednesday downgraded the stock to 'sell' from 'outperform', a vote that prompted Lenovo's share price to fall 10.37 per cent.

Last week, Lenovo chairman Yang Yuanqing said the company had a lower exposure in the US compared with its leading competitors, and a bigger presence in the world's emerging economies.

But market watchers said Lenovo's next target segment - the consumer market overseas - was too competitive to give it much headway.

'The company's efforts in the consumer space will give it a new market to pursue, which should certainly boost growth. But it is a competitive market, so the company will have to execute well to take share away from Acer and HP,' Mr Loverde said.

He said Lenovo needed to sell one million personal computers in the international consumer market in the first quarter - 'over an 18 per cent increase from the company's current volume of shipments' - to keep pace with fast-growing Acer.

IDC has forecast personal computer sales worldwide to be up 14.6 per cent and reach 269.8 million units last year from 235.4 million units in 2006.

Notebook computer adoption, especially in the consumer segment, remained a key driver for the whole market, Mr Loverde said.

Lenovo is ranked ninth worldwide by IDC in consumer laptop sales.

Acer, meanwhile, has increased its global footprint since completing in October the US$710 million buyout of California-based Gateway, the fourth-largest personal computer supplier in the US.

That deal allowed Acer to fund Gateway's purchase for an undisclosed sum of PB Holding, parent firm of France-based consumer electronics vendor Packard Bell. This thwarted Lenovo's earlier bid to acquire Packard Bell, a leading European computer supplier.

According to IDC's third-quarter global estimates, HP led the personal computer market with a 19 per cent share while second-place Dell had a 14.7 per cent share.

Lenovo was third with an 8 per cent share and Acer fourth with a 7.8 per cent share, before the Gateway and Packard Bell acquisitions.

'If Acer sustains quarterly growth of roughly 20 percentage points greater than Dell over the next two years - for example, Dell at 10 per cent and Acer at 20 per cent - then their quarterly volume shipments could be comparable by the end of next year,' Mr Loverde said.

Thomson Financial estimated Acer's annual net profit to reach NT$13.04 billion (HK$3.15 billion) for last year, up 27.6 per cent from NT$10.22 billion in 2006.

Lenovo's net profit was forecast to rise 119.95 per cent to HK$2.77 billion this financial year to March from HK$1.26 billion a year ago.

Making strides

Acer is topped only by HP, Dell and Lenovo in the PC market

The amount Lenovo's shares dropped last Wednesday after a downgrade by brokerage house CLSA: 10.37%