Acer slims down ahead of major restructuring

Taiwan’s Acer Group has slimmed down its operations worldwide ahead of a scheduled unveiling of its second major restructuring effort in as many years.

Acer chairman and CEO Stan Shih, following consultations with the group’s top management, is scrambling to come up with a plan to bring the once high-flying PC vendor back on track. Scheduled to be unveiled before year’s end, the restructuring effort is expected to include a reshuffle among the group’s top executive ranks as well as a renewed focus on the sale of Acer-branded products.

Published reports earlier this week said that Shih may also be looking at divesting the company’s OEM (original equipment manufacturing) business, which makes PCs for vendors including Dell Computer Corp. and IBM Corp., but an Acer spokeswoman Thursday denied the existence of any such plan.

“We have no plans to sell off our OEM business,” said Stella Chou, a spokeswoman at Acer. “We are only looking at selling non-core assets.”

The restructuring will follow a streamlining of Acer’s worldwide manufacturing and assembly facilities. Acer Inc., the group’s core PC-making unit, has since last year cut down from 30 to 13 the number of final assembly plants, called Uniload centres, that the company operates worldwide. The slimming down has resulted in staff cuts of around one-third of the company’s total workforce in Europe, the United States and Latin America.

In Latin America, where Acer’s losses for this year are estimated to reach $15 million, the number of assembly sites has been cut from six to one since 1999, Acer said in a statement issued Tuesday. The company has also consolidated its main assembly operations in Europe and the Unied States – where Acer expects losses of around $20 million and $25 million for the full year 2000, respectively – by shutting down operations in Hamburg, Germany and San Jose, Calif.

Acer’s goal for next year is to lower the PC unit’s reliance on contract manufacturing. Its OEM business will make up 55 per cent to 60 per cent of total revenue this year, which Acer aims to cut to 50 per cent in 2001.

The PC-making unit has seen its share price drop like a stone. In October the unit slashed its earnings and revenue forecasts for the full year, citing weakening global PC demand.

To be sure, Acer is not alone in finding the current PC climate hard to stomach. Following Acer’s announcement, several of the world’s largest PC vendors, including Compaq Computer Corp., Dell Computer Corp. and Gateway Inc., have also warned that their fourth-quarter results will come in below earlier expectations.

Acer, meanwhile, is counting on its planned sales of non-core assets to make up as much as one-third of total profit in 2001. The company holds minority stakes in companies including Taiwan Semiconductor Manufacturing Co. Ltd., the world’s largest contract chip manufacturer, and Taiwan Cellular Corp., the island’s largest mobile phone operator in terms of subscribers.

In Acer’s last major restructuring effort – which much like this one was mainly due to a slowdown in sales

– Shih in 1998 also aimed to bolster the company’s own-brand business as well as tighten up logistics.

Acer, in Hsichih, Taiwan, can be reached at