San Francisco/Taipei: As the personal computer (PC) industry embarks on its fitful road to recovery, many are betting that Acer Inc. and Hewlett-Packard Co. (HP) will lead the rebound with surging netbook sales and a strong presence in booming Asia.
These two PC makers are expected to gain from consumer demand in China, India and other resilient Asian markets, even as corporate demand stays weak in the global economic slowdown. Acer, the world’s No. 3 PC brand, can bank on its strength in the fast-growing, low-cost netbook segment, while HP’s broad customer base and product mix will stand it in good stead.
“Acer will more likely recover quicker because they’re doing well in the pockets that they’re in... they’re one of the lower cost providers out there that is still respected,” said Louis Miscioscia, research director at tech-focused US firm Brigantine Advisors. “In this bad market, someone might be more willing to give Acer a chance.”
Acer dominates the netbook PC segment, shipments of which, research firm IDC forecast, will more than double this year to 26 million units, helped by consumers reining in on their discretionary spending.
This has pushed up valuations at the Taiwanese firm, which trades at a relatively high 18.3 times forward earnings, bolstered by a 90% advance in its stock price since the start of this year. In contrast, HP trades at 11.6 times, while Dell Inc. trades at 14.3 times, according to Thomson Reuters data.
Despite the high valuations, most analysts still favour Acer as it remains firmly in the driver’s seat until corporate IT spending recovers, helped by its dominance in the low-cost segment of the market and a lean cost structure.
HP is also expected to come out ahead, since the company already has a kickstart with consumer demand that has shown signs of picking up, and an additional boost when corporate demand returns. Its shares are up about 25% so far this year.
HP, the world’s largest PC brand, is also strong in Asia, in particular India and China, where it is the first- and second-ranked PC brand, giving it the critical mass needed to compete in the two large and diverse markets.
The launch of Microsoft’s next-generation Windows 7 operating system is now the remaining wild card in PC makers’ outlook. Such software launches have often spurred sales, but paired with an economic slowdown, the response could be lukewarm. A recent survey of at least 1,000 companies by ScriptLogic also found that some 60% of them planned to skip Windows 7 on cost and compatibility fears.
Lenovo’s chief financial officer (CFO) Wong Wai Ming also attested to those fears in a recent interview with Reuters.
“Many CFOs are especially sensitive to cost right now, and will not increase capital spending just because the economy seems to be doing better now,” he said.