At the Asia-Pacific IT Summit in November 1997, Stan Shih, chairman of Taiwanese PC giant Acer, forecast the end of the multi-purpose PC, the machine on which he has built his business. He believes the PC will be replaced by a host of application specific computers, such as home banking computers, game computers and education […]
At the Asia-Pacific IT Summit in November 1997, Stan Shih, chairman of Taiwanese PC giant Acer, forecast the end of the multi-purpose PC, the machine on which he has built his business. He believes the PC will be replaced by a host of application specific computers, such as home banking computers, game computers and education computers. As a result, said Shih, the biggest vendors will be those that offer the best software, rather than those whose machine has an ‘Intel-inside’ badge. Shih was speaking at the unveiling of the Acer’s X-Computer, a $200 machine which will form the foundation of the computer of the 21st century, says Shih. Although the X-Computer idea sounds similar to the Network Computer idea of Oracle CEO Larry Ellison, Shih is in a better position to execute. Shih founded Acer in 1976 and has built the company into the third largest PC manufacturer in the world, with a sales of $5.9bn in 1996.
By Graeme Burton
The key to Acer’s X-Computer (XC) strategy is to start developing its own software – a strategy which has attracted speculation that it intends to become the next Oracle or Netscape. But that is not the plan: It intends to use software to add value to the company’s existing products. Acer has already started pre-loading network management software on to some new PCs and servers, for example. As the shift from PC to XC takes place, Acer, with its software portfolio, will be positioned to take advantage, believes Shih. The company has already learnt the hard way that, in order to shift low-cost computers, a low price tag alone is not always compelling enough. In 1996, Acer launched Eden, a $500 computer based on ‘trailing edge’ PC technology. Sold only in Asia and aimed at cost-conscious consumers who wanted a PC but could not afford to pay $1,000 for a system, Acer’s plans to sell 200,000 Edens were dashed by Nintendo and Sony, whose games machines were cheaper and enjoyed greater appeal in the shops. Acer’s plans to move into software are at an early stage, although a few products will be ready this year, says Taipei- based spokesman Brian Appleby. Few targets have been set, but Shih has laid down a long-term goal of building up competence in approximately 100 software-related areas over the next decade. The first steps have already been taken with the creation of a development center in Shanghai in China, where skilled labor is cheap and plentiful. Currently employing just 30 staff, Acer plans to ramp up to 150 before the end of 1998. In addition, Acer is also on the look-out for ‘hot prospects’ it could acquire, particularly in the Silicon Valley area, says Appleby, although Acer is not giving details of what type of companies it is interested in. But analyst Martin Hingley at International Data Corporation says it is not the first time Acer has tried to move into software. Its 1990 takeover of Altos Computer Systems, a high-end Unix machine and niche software supplier, brought with it considerable software expertise. However, the takeover was botched and today Altos is just an Acer brand name, tacked onto the company’s NT and SCO Unix line. I shouldn’t think there’s much of that culture left in the company. If you look at its server operating system mix today it’s pretty standard: NT and NetWare. Even the SCO Unix, which Altos used to supply, is not very strong, says Hingley. It is clear why Shih wants to alter the company’s strategy. Acer has been hit harder than many other big PC manufacturers by intense competition, because it is focused predominantly on the low margin consumer segment. Only 30% of the company’s PC sales are made to businesses.
In the company’s flagship US operation, which accounts for 22% of Acer’s revenue, Shih is expecting losses of around $75m for 1997 as a result of inventory problems and price competition. Its market share in the US retail market fell from under 15% at the end of 1995 to around 5% at the end of last year. The company nevertheless remains strong in PCs and PC servers in South East Asia as well as in the Middle East. On top of these problems, Shih must contend with the effects of the plunge in dynamic random access memory (DRAM) prices to below $3. As a result TI- Acer, the company’s semiconductor joint venture with Texas Instruments, is forecasting net losses of $91.6m for 1997, on sales down from $468m in 1996 to $375m. It is not surprising Shih is eyeing up the software business.
Computer Business Review