ATHENS, 20 September 2005 — Data on the information technology market indicates that during the second quarter of 2005, the PC market in the Europe, Middle East and Africa (EMEA) region posted a 20.2 percent average growth over the same period in 2004. In this context Acer has outperformed the market, confirming its third place in the EMEA PC market with a 68.4 percent annual growth rate.
Acer announced these results before an audience of over 300 journalists at its annual Global Press Conference 2005 held Saturday in Athens, Greece. In the notebook sector, Acer consolidated its leadership in the region by posting a 70.5 percent annual growth rate (2004-2005), strengthening its top ranking in the EMEA region notebook market holding 19 percent market share in Q2 2005.
“Acer is the No. 4 vendor in the global PC market and together with Dell, we are the only two vendors showing increasing market share. While we are now No. 4 in notebooks worldwide, we are close to taking No. 3 Toshiba,” said Gianfranco Lanci, Acer Inc. President. “In the total EMEA PC market HP is No. 1, Dell is No. 2 and Acer is No. 3. In the total EMEA notebook market Acer is No. 1, HP is No. 2 and Dell is No. 3.”
Lanci warned that challenges lie ahead for all vendors and vendor consolidation is on the horizon. High volume growth does not necessarily equate with high revenue growth as margins shrink with falling PC prices. A limited number of PC vendors will remain in three years. Acer believes it will be one of them. The company is in excellent condition in EMEA, profitable in all countries.
At the press conference, Emanuele Accolla, Acer’s EMEA VP, spoke specifically about the Middle East and Africa (MEA). He pointed out that while high political, social and economic turbulence continues to affect the region, the area’s potential is simply too large to ignore. Large education programs involving PC purchases have been launched by several Ministries of Education in the region and the governments of oil-based economies have increased spending as well. Strong consumer demand has been witnessed by Acer in Saudi Arabia and the UAE.
“Between 2002 and 2005 Acer has grown its MEA business by a factor of six,” Accolla said. “We are a solid No. 3 overall in the region. Desktops still make up the majority of our sales and in that segment we are growing faster than the market. In notebooks we are growing at the same pace as the market. In MEA’s LCD monitor market Acer is No. 2. By the end of August, Acer exceeded 2004 revenue in MEA. We want to exceed 2004 revenue by 40 percent in 2005 and we are on track for that goal.”
Acer’s president added that the company believes its success in MEA can in part be attributed to its policy of treating emerging markets in the same way it treats mature markets — offering a full product line.
“Some companies use emerging markets to phase out old models or they have a limited product range,” he said. “Acer does not achieve revenue in this fashion.”
In fact, Acer appears to be ready to play a stronger role in the emerging markets of the GCC with its decision to open an assembly facility in Saudi Arabia. Acer has been promising for more than five years to locate a country manager in the Kingdom. It seems that finally the time has come. According to Krishna Murthy, Acer’s GM Middle East, by the end of 2005 Acer will formally announce plans to set up direct in-Kingdom representation including an assembly plant and service facilities.
“By the end of this year we should finalize everything. We would have decided what is the right mode of entry into the Saudi market and chosen a partner by then. Once we have taken these two decisions, following that will be decisions on the service operation, marketing operations, etc.,” said Murthy.
The reason for Acer’s enthusiasm in investing in the Kingdom is that demand for computers is exploding in the Saudi market.
“The Saudi market is very crucial for the Middle East,” Murthy remarked. “Today for example more than 30 percent of Acer’s Middle East revenue comes from the Saudi market and it is growing. This year we are talking about 650,000 units total, desktop and notebooks for the Saudi market. Out of that, close to 320,000 are laptops. They are already close to 50 percent of the market and we expect that percentage to grow. Desktops will continue to decline and laptops will increase. We are leading in the notebook market so the future looks very bright for Acer.”
He added, “Last year Acer had a market share of close to 17-18 percent overall in the Kingdom. Last year the market was around 550,000 units so that would mean we shifted close to 100,000 PCs in the Kingdom. The market here will become increasingly competitive. In 2009 it is expected that Saudi Arabia will be the 11th or 12th largest PC market globally with 1.5 million units total sold in the Kingdom annually. That is why it is essential that we set up our own operations in the Kingdom.”
Acer needs to move quickly to get its operations up and running in the Kingdom because it is already losing deals due to a lack of direct presence. In July, Dell won a bid offering from the Ministry of Education to provide 30,000 desktops and 2,000 servers for the computer labs in 1,700 Saudi schools. This was the biggest one-time deal of its kind in the Kingdom’s history. Acer plans to make it much more difficult for Dell to win such contracts in the future.
“Coming to the desktops on the MOE deal, there was a lot of confusion,” said Murthy. “Basically, the deal kept going back and forth between Dell and HP. Education comes in as one large tender that normally goes to either Dell or HP and we give it a fight. It’s really not the price. It’s the account relationship and management that counts. A direct presence will give Acer the edge.”
Acer is hard at work investing in brand equity in the Kingdom. The company participated in the last two GITEX exhibitions in Riyadh with a large presence. Murthy is of the opinion that if the exhibition were switched from Riyadh to Jeddah it would be even better because more vendors would want to come and women could participate easier.
Murthy also discussed Acer’s relationship with Jarir Bookstores. Jarir is the representative of choice for branded PCs in the Saudi consumer market. Visiting a Jarir showroom, consumers can see the top desktops and notebooks, but it isn’t clear how Jarir promotes and positions the products.
“Jarir is a venue where mid-range and high-end products sell well,” explained Murthy. “Jarir needs a sufficient margin as they call themselves a premium retailer. They are not a power retailer like certain discount outlets. Jarir feels that the customers who shop in its bookstores are of a certain class and that they want the showroom and customer service to be suitable. This means that they need a higher margin because they aren’t running a stripped down operation.”
Murthy has seen that especially in Riyadh, Saudi women are restricted in the stores where they either can or will shop. Saudi women are huge clients of Jarir. That’s why it is important for all PC vendors to target Jarir in order to reach the affluent members of Saudi society.
“It’s important to remember when going to Jarir that many vendors are trying to get a good amount of the retail space and the competition for excellent positioning in the showroom is fierce,” said Murthy. “When Jarir buys a very large quantity of a certain PC, they have to position it well in order to liquidate the stock quickly. Customers need to be educated on what features they want in a PC before they go to Jarir or any shop, and if they are looking for a very cheap entry level PC, Jarir might not always be the place to find it.”
While its strong drive toward the highest success in 2005 continues, Acer already has its sights set on the challenges ahead in 2006. Focus on China will be intense and India could play a stronger role in Acer’s plans in future years if its tax regime rationalized. Acer’s president advised that the company has been well served by its step by step approach to increasing its products and market share globally. Acer has focused on notebooks in recent years and its next area of focus will be servers. Acer believes that it has a strong role to play with servers in addressing small- and medium-sized businesses. Additionally, Acer has put forward the following 2006 goals:
• Reaching third ranking position in the global PC market worldwide by 2007;
• Reaching a market share in the global PC market of 4.5/5.0 percent;
• Increasing annual growth objectives from 40 percent to 50 percent.
One sure thing is that Acer is counting on success in the Saudi market to help it reach those goals.
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