Acer Inc. , once a high-flying PC vendor, is licking its wounds -- again. After what seems to be a serious misreading of market demand and equally disconcerting missteps in supply chain planning, the company is slashing its full-year tablet shipment target by 60 percent, dumping three million laptops into the European market to clear channel inventory and taking a one-time $150 million write-off in operating losses.
On Wednesday, chairman J.T. Wang said after a shareholder meeting that 2011 tablet shipments were revised downwards to between 2.5 million and three million units from the five to seven million units it expected to sell at the beginning of the year. Acer's Iconia Tab touch-screen tablets came out in April, and it's clear it can't catch up to Apple Inc. (Nasdaq: AAPL) and its market-leading iPad.
This also comes on the heels of other bad news. IDC's most recent report measuring PC market health indicated that Acer's shipments were down 16 percent in the last quarter following a 15 percent decline in the quarter before that, according to reports. Earlier this week, headlines in Europe touted that shoppers will soon see deep discounts on Acer products as the company floods the region with three million laptops and tries to whittle down excess inventory. Two weeks back, Acer put out a press release stating that the high channel inventory and disputed accounts receivable in EMEA (Europe, Middle East, and Africa) operations would result in a $150 million write-off.
These kinds of blunders boggle the mind. I know we still have a long way to go but supply chain practices, technology, and strategies have come a long way in managing the bullwhip effect. Given the amount of information, skills, and experience companies like Acer have accumulated, how could an OEM get so far off track?
Yes, Acer's is having a tough year. It's dealing with management reorganization issues, lower-than-expected sales, and confusion about where to place its bet as the laptop-netbook-tablet roulette wheel spins. (See: Acer Needs a New CEO, Plus a New Tagline and What's Next for PC-Centric Acer?.) Then, there's the Apple factor. The iPad seems to be throwing everyone for a loop.
That can't be all that's going on at Acer. What happened to the agile Taipei-based company that only a few years ago elbowed its way to the No. 2 PC slot and posed a legitimate threat to the likes of Dell, HP, and Lenovo? Did it ignore the exception-management alerts flashing throughout its ERP system? Did it cross its fingers and hope the PC-tablet conundrum would sort itself out by the time its products hit the shelves? Is the recent change in leadership too much to digest?
The company's plans to correct the ongoing problems don't instill too much confidence either. The same press release cited earlier states:
Acer does expect, however, to put business back on the right track soon. Acer will continue to identify the cause and related responsibility ownership, propose actions and make appropriate workflow adjustments to enhance future management.
Of course, Acer will take necessary steps; most companies would publicly say the same thing. But is it too late to save 2011? Should Acer set its sights on 2012, reassess its strengths, and devise a product strategy that would help it maintain a stronghold in the sector?
In the wake of Acer's slump, I also can't stop wondering if the situation is entirely different at other high-tech corporate headquarters. I imagine a fair number of senior OEM and EMS executives are demanding more accurate data from their supply chain teams. I can't imagine how supply chain professionals are responding. There's no good answer to this eternally perplexing question: How can we forecast anything when the market's in constant flux?