Whatever Happened To Acer?

THE STATE OF ACER: Remember Acer? They were a computer brand that took the Western market by storm in the late 2000s and early 2010s. They were the leaders of the Asian computing boom along with Lenovo and Asus. And during the peak of 2009, they controlled more than 13% of the global computer market, making them the second best-selling computer brand, second only to HP. But unlike Lenovo and Asus, which have been able to steadily increase their market share, Acer has been steadily losing market share. In fact, at the end of 2014, Acer was no longer even among the five best-selling computer brands.

Acer's market share sits at around 6.7% or about half of its peak, and its fundamentals have fallen further. Its revenue has fallen from $20 billion to just over $7 billion. Interestingly, its net income hasn't decreased much because Acer never made much to begin with. They have always been floating around the equilibrium point. As you can imagine, investors haven't viewed this performance too kindly, leading to the company falling from a market cap of $8 billion to a market cap as low as $1 billion. Acer stock has recovered quite a bit since then, but it's still halfway to its highs, and that's not even taking inflation into account.

But what

happened

? If we look around the electronics space, we will see that it is still largely dominated by Asian brands. The television market, for example, is controlled by Sony, Samsung, LG and, more recently, TCL, which did not even enter the North American market until 2013. Within the PC industry, Lenovo, and the Asian brand, is the market leader and controls a quarter. of the entire market. Therefore, it is not that Asian brands as a whole have fallen, but only Acer. So what

happened

to Acer? COPYCATS: Looking back, Acer's story takes us back to a Taiwanese man named Stan Shih.

After completing a bachelor's and master's degree in electronic engineering, in 1976, Stan partnered with his wife and five of his friends to create an electronics company called Multitech International. While the company was basically a garage startup, they actually accessed quite a bit of capital. All of the founders had fairly successful engineering and business careers before starting Multitech, so they were able to raise a solid $25,000. That's roughly equivalent to $135,000 today. With that capital, Multitech was able to hire some employees and become an electronics consultant and distributor specializing in microprocessors. And for the first few years, this was pretty much all they did.

But its trajectory would change greatly after the launch of the Apple II. Multitech was intrigued by how Apple was targeting the consumer market with friendly-looking computers. Naturally, they wanted to do something similar with their own unique twist, which led to the creation of the Micro-Professor MPF-I. It didn't look like any computer you'd ever seen. Instead of being a big white box, the Micro Professor was a tablet of sorts that came in a clear plastic case. The idea was that the computer looked like an audio cassette and could be integrated into a bookshelf. This computer was released in 1981 for $150 and would become a huge success.

In fact, it would sell for the next 12 years, making it one of the best-selling computers of all time. But, after creating this unique masterpiece, Multitech would take the easy way out with its next computer: the Microprofessor II. This computer was a blatant copy of the Apple II. In fact, one of the only differences between the Microprofessor II and the Apple II was that the Microprofessor could reproduce Chinese text, which, ironically, was quite difficult to do given that there are thousands of Chinese characters. Multitech also took a similar approach with its next computer: the Microprofessor III. However, instead of copying Apple, this time they largely copied IBM's personal computer, only their version was less than half the price, starting at just $700.

These low prices made them quite popular in Western markets, leading to a new name and market strategy in 1987: Acer. ACER DISRUPTS: Acer's value proposition was extremely simple: they produced the same computers that Western brands produced, only cheaper. While their computers generally offered excellent value for money, if you took price out of the equation, there wasn't much going for them, but that was okay because that was exactly what the market wanted. In the late 1980s and early 1990s, computers were advancing at record speed. Processors were constantly doubling in speed and RAM usage went to the moon. But not only were computers becoming much faster, their applications were also expanding rapidly.

We saw the rise of the Internet, browsers, email, floppy disks, online media, travel portals and much more. And the thing didn't stop there either. Computers were not only becoming faster and more useful, but they were also becoming much cheaper. The brand leading this trend was Dell, which constantly pushed the boundaries when it came to price. I think you can see how all of this was pretty overwhelming for the average person who had a hard time keeping up with the pace of innovation. No matter what computer they bought, it would be completely obsolete in terms of speed, applications and price in just two years.

So given the short lifespan, most people simply bought the cheapest computer they could get, which was usually from Dell, HP, or Compaq. While Acer was by no means the leader of this cycle, it also benefited greatly given that its main selling point was price. Meanwhile, brands that had more expensive flagship computers, such as Apple and IBM, were eliminated. This is why IBM completely abandoned the consumer PC market and why Apple nearly went bankrupt before Steve Jobs came back and turned the company around. Entering the 2000s, this trend would simply accelerate as consumers reached peak computer fatigue.

This was only made worse by the fact that global PC shipments peaked in the late 2000s. This meant that the majority of PC buyers were no longer first-time buyers but rather repeat buyers who only wanted the most cheap as they could get, leading to an unprecedented run for Acer. They didn't even become one of the top five computer brands until late 2003, when they controlled about 3% of the market. However, in just five and a half years, its market share would quadruple to exceed 13%. It was the same thing that happened in the 1990s, but at the next level.

Instead of Dell, HP and Compaq kicking out Apple and IBM, it was Acer, Lenovo and Asus that kicked out Dell and HP. So in reality, Acer's success had less to do with any kind of unique brand positioning or added value and much more to do with market sentiment. It just so happened that market sentiment throughout the '90s and '00s greatly favored the price, allowing Acer to come out on top. Seeing this, most predicted that the computer industry would become an endless race to the bottom, similar to the television industry, where only Asian brands can compete, but that is not exactly what happened.

CHANGES IN MARKET SENTIMENT: Moving into the 2010s, the entire PC industry received a breath of fresh air due to three reasons, starting with the rise of smartphones. Smartphones almost single-handedly revitalized the consumer's technological spirit. For the first time in a long time, people were excited about these minicomputers. They went out of their way to buy these devices because they wanted to experience them not just because their computer was outdated for the fifth time this decade. Steve Jobs took advantage of this interest and launched the MacBook Air in early 2008, which was one of the first notable computer launches since the '80s.

At that point, the rest of the industry had just become a bunch of serial numbers that They all looked like the Dell Latitude 5490. However, Apple was only part of the puzzle. The second part of the puzzle was achieving maximum computing performance. Now, technically, transistors in processors continued to reach the moon, but for the first time, this didn't really matter to the average person because they simply didn't need extra power. In fact, the only thing most people needed was an Internet connection, which led to the rise of Chromebooks. It wasn't just the specifications of computers that were beginning to peak, but also the form factors of computers.

Computers went from white boxes to black boxes to rectangular prisms to laptops, which is what they still are for most people to this day. As such, people started keeping their computers for 4, 5, or 6 years at a time before upgrading. In fact, the current average is 5.63 years and is expected to increase to 6.54 years by 2027. Additionally, I would speculate that those numbers are actually being averaged out by corporations and schools that tend to replace their computers with much more frequency. Therefore, the actual average among consumers may already be closer to 7 years. Why does this matter? Well, it completely changes the way people view buying a computer.

Nowadays, people view a new computer as a 5-7 year investment rather than an everyday commodity, which is what computers were becoming back in the 2000s. As such, they are much more willing to spend more on each computer purchase as they become less common, leading to purely budget brands like Acer largely falling out of favor. And that brings us to the third, and probably most important, point, which is the evolving importance of computers. In the '90s and '00s, most consumers bought computers so they could email their friends, scroll through Friendster, play simple online games, and Google stuff.

In other words, computers were a discretionary and enjoyable purchase. But, as we move into the 2010s and especially after the pandemic, computers have become a vital part of most people's income and livelihood, regardless of their profession. Whether you're a music teacher, a doctor, a police officer, or a plumber, you probably have some kind of productive use case with computers on a day-to-day basis, so why spend so much money? That seems to be the modern sentiment that has caused Acer's demand to fall off a cliff. ACER FORECAST: The bottom line is that Acer never really built a brand, and this is the biggest deficit between Acer and any other computer brand.

Of course, you have the Apple sheep with the Macs, which I am a part of, but you can also say the same for all the other brands. I mean, have you ever seen the Lenovo Thinkpad community? Those people swear by the Thinkpad and hail Thinkpad Linux as the best productivity machine ever. The same goes for Asus, except instead of appealing to the productivity community, Asus appeals to the gaming community. I mean, images like these tell you everything you need to know about how strong the Asus brand is. I should note that these are not promotional images from Asus.

These are hardcore Asus fans who build Asus themed builds with their own money. And if you're not an Apple sheep, a Linux nerd, or an avid gamer, you're probably just looking for a good value computer that you can get from HP or Dell, who have reduced their consumption margins to basically 0 and They have made the transition. entrepreneurial business. And that pretty much covers the entire modern consumer computer market. There is no place for brands like Toshiba, Acer, Sony and even Samsung. That's why most of them left the consumer-oriented PC business. The market had become segmented into a few key sectors and these brands simply no longer fit neatly together, and this is not for a lack of effort.

Acer, for example, has been trying to enter the gaming market and has done a decent job, but not enough to displace the leader, Asus. And I think that pretty much sums up the whole Acer story. They started cloning Apple and IBM computers and, to this day, they continue trying to clone the success of others. At one point, that approach turned out to be quite fruitful, but that didn't last forever and led to Acer's current state: a brand lost in time. Unlike Acer, TCL has managed to stop being just a cheap brand. Watch this video to learn more.