Analysing Acer's astounding admission

New broom J. T. Wang is keen to send out right message to financial community, writes CRN deputy editor Doug Woodburn

By Doug Woodburn

Yesterday's quadruple bombshell from Acer was designed to send a clear message to jittery investors.

The language used in the four simultaneously issued press releases was as sensationalist as the subtext was clear: new broom J T Wang is intent on clearing the decks and drawing a line under Acer's recent woes.

Chief among them was the announcement that Acer is swallowing a $150m write-off to clear out a glut of excess inventory from the EMEA channel.

This seems like a lot - and it is a lot - but Acer's inventory woes are nothing new and the announcement has been taken by some as a sign that Wang is merely keen to address the issue publicly.

The Taiwanese vendor's aggressive sales-in tactics have periodically led to accusations of channel stuffing down the years. In the UK at least, Acer moved recently to ease the pressure on its distributors by focusing more on sales out than sales in, halving stock levels year on year.

Putting aside the sinister references to "abnormalities" in channel inventory and accounts receivable in Spain, for a vendor that generates half of its $20bn turnover from EMEA, the write-off represents a tiny fraction of its regional sales.

One of Acer's UK distributors is known to still have a glut of stock but this is hardly surprising given that all the major vendors are struggling to adjust their channel inventory in line with the shift away from PCs and towards tablets. According to data from market watcher GfK Retail and Technology UK, UK PC sales plunged by 22 per cent in April year on year.

One distribution source told me this morning: "There has been a long-term over-supply on Acer but we are coming under less pressure to take stock."

In summary, Acer's unusual candidness was more striking than the information contained in the release itself.

But there was more, as the struggling Taiwanese vendor announced it is to shelve 300 jobs in EMEA. Two further investor-pleasing press releases were attached in the same email, revealing that Wang is voluntarily forgoing his entire salary and bonus and that the rest of the board is taking a 50 per cent pay cut.

Yes, Acer has genuine problems and some of the content in these announcements is not to be taken lightly. Its share price has slumped, its market share is declining and its profits are shrinking fast and if the vendor doesn't react quickly, it could end up being the highest-profile casualty of the tablet boom, mirroring the recent demise of local player Mesh.

But this set of announcements was as much about the new CEO making his mark as it was about repairing the firm. It is rare in my four and a half years covering the UK channel for a vendor to acknowledge channel inventory issues, let alone actively open up about them publicly and these announcements suggest that, more than anything else, Wang is keen to exorcise a few ghosts.