Thursday, 2 June 2011

Acer - The Untold Story?

Finding $150 million of inventory you 'thought' you didn't have is quite a mishap.

I mean, it isn't that easy to miss a pile of computers that high. So when this small line in $4bn+ quarter of sales that Acer reported cropped up it was very big and bad news. But it's a governance thing really as a write off of that size isn't that huge, it's only Europe that had the problem and it's a one off anyway.

It is a one off, isn't it?

The share price over the last 3 months has halved, the CEO, JT Wang, has foregone his salary and 300 staff will be fired in Europe. I am not sure what percentage of the European staff that is but Acer are traditionally a lean and mean company in Europe so I would venture not for off a third of the staff in the region. That's a big, big mistake then.

Against the back drop of the actual performance numbers, this write off, embarrassing as it is, should not be such a massive blow to the company. And that sort of makes you think, 'What other bad news is to come?' Not that I am rumour mongering but it does reflect a feeling in the channel.

The trouble is that some pundits believe that this little accounting error has been going on a while. When you take industry figures there always seemed to be a mismatch in sales in and sales out data at Acer. In the old days a distributor might have thought about having a lorry circling the M25 at year end with excess inventory 'sold' on phantom orders to be booked back in on day 1 of the new year as 'returns' but in these modern times to do so would be to cheat investors and markets don't forgive.

So are there bigger and wider problems at Acer? We know the PC market has taken a bashing and figures suggest as much as 14% down for Europe, and as Acer is a big share of that it has to hurt. But such figures could be aimed at HP, Dell, IBM and others generally.

I think this story has a way to run. Yesterday alone, Acer shares hit the Taipei stock market limit for a fall in a single day. There may be no smoke without fire.

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