Is Acer Success a Flash in the Pan?

Sure, Acer has gained incredible market share over the last 18 months from its fellow PC makers and clawed its way to the worldwide number three PC manufacturer in the process. The question is, how long can the Taiwanese company hold onto its position of strength in the market?

Not long, say analysts, if Acer doesn’t take steps to address its channel strategy.

“If they're here to stay in the U.S., I really believe they need to bring more value to their channel,” says Christina Richmond, a channel analyst for IDC. “They need to offer them better marketing materials, more of a value partner program and they need to be more involved with that midmarket-focused solution provider than just the volume resellers.”

According to Richmond, Acer has made its run on the worldwide PC market by following a high volume channel strategy and targeting consumers over business users.

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“They don't tend to work as much through the value added resellers as much as they work through more of the volume places,” she says. “None of their products really reach up into the small medium enterprise or the enterprise itself. I think they'd like to think that they do, but the evidence that we're seeing is that they're much more of a low end player.”

Richmond isn’t alone in her assessment. According to a report released by Gartner this month, Acer needs to expand its repertoire to maintain long-term viability.

“Acer's efficient operation, supply chain and channel program can be easily copied by others. Acer needs to find a way to add value for customers and build brand loyalty — it must take its brand beyond price-sensitive buyers,” writes Tracy Tsai, author of the report, SWOT: Acer, PCs, Worldwide Update.

According to Gartner, last year Acer rose to become the number three worldwide PC manufacturer behind HP and Dell, and the number two worldwide mobile PC manufacturer behind HP. The company has Dell in its sights this year, seeking to supplant the American manufacturer’s spot in the pecking order. According to IDC Dell is barely holding on to the number two position with 13.6 percent of the market compared to Acer’s 11.6 percent. Last year, Acer added an additional 3 percent share compared to Dell’s razor thin pickup of 0.1 percent.

Much of the gain Acer has seen recently has been on the back of its netbook offerings, which have attracted consumers with attractive pricing and extreme portability.

“Everyone is suffering at the hand of Acer's netbook, and they're just everywhere and they're winning on price everywhere,” Richmond says.

However, this early gains produced by this approach could spell long term trouble for the company.

“Acer is especially vulnerable because its competitiveness relies on pricing. When low pricing is no longer able to stimulate purchases and the market becomes saturated, Acer will face a serious problem in maintaining its competitiveness and scale of shipments,” Tsai of Gartner writes.

This high volume, low price strategy weakness applies throughout the Acer line, Richmond of IDC warns.

“They're having some good luck because they've got the price points that this economy wants,” she says. “But if they wake the sleeping giant and they don't have a real solid connected approach with their channels, then what have they gained? They've gotten short term market share, not long term market share.”