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We interview EMEA deputy president Walter Deppeler

Acer?s high

Your Q2 profits showed a year-on-year drop of 20 per cent, while operating income was actually up 12 per cent. Is this indicative of lower margins on the grass roots level, brought about by the cheaper netbook boom?

The operating income was up. Margin percentage could be kept around same level as previous quarters. In addition, we could manage expenses quite well. We’ve just announced that we think Q3 revenue will be at above $5 billion, so this indicates that we are performing well too, and we’ve grown in terms of units as well as revenue in 3Q09, while the overall market in EMEA has declined in terms of units by more than ten per cent on PC.

Retailers can’t get much margin out of netbooks and other cheaper devices – is there a danger of the profit falling out the bottom of the channel? Or will the general boost in demand counter this?

It depends – each channel has a different dynamic. The question is how much you grow. If the selling price on products declines, you need to achieve a significant increase in quantity to achieve the same amount of revenue.

Our intention is not at all that the channel declines on margin percentages, but it is important that a channel grows at least as much as the market is growing. If a channel starts to lose on market share, then the risk remains that you fall down significantly on revenue. But there is no intention to reduce margin percentage because we are channel-centric. It is important to us that there is a win-win situation in the channel’s margin as well as our margin.

As you mentioned, you’re anticipating revenues of $5.019 billion for Q3. This would represent a 40 per cent jump compared to the last quarter – what in particular do you think will drive this jump?

On one side the market is picking up a bit. Also, if you look more specifically at the EMEA region in the first half of the financial year, we had areas like Russia – and Eastern Europe in general – down between 70 and 80 per cent in terms of units. But we could offset that quite well in Western Europe. So we predict demand continuing to be solid in the West, and while there will still be decline in the East, it will begin to recover. Our unit growth in 3Q09 was significant. We saw strong demand on notebooks and netbooks, but it was also growing on desktop. We grew in Asia Pacific and China, too.

If you’re anticipating growth for the rest of the year, do you consider the recession’s impact on the IT industry over?

We see that there is a stronger demand overall, but about 70 per cent of our business is coming from consumers, and the remaining 30 per cent is coming from the SOHO and SMB market. We were less under pressure in last quarter, whereas in the first half we were strongly impacted. I would still say that consumer demand is decent, whereas overall we anticipate that we will remain on the same revenue level year-on-year, which would be a great achievement.

Basically, that means we will just lose one year, and next year the market is going to start growing by double digits in terms of units.

You’ve just announced your first touchscreen notebook, the Aspire 5738PG. How big would you say this category is going to become? Will touchscreens come to dominate the market or will they always be niche?

We have touch technology not only on the notebook, but also on the new allin- one. We’ve launched touch on the new monitor, too. When you think of how consumers are used to working, be that on a washing machine or some other appliance, they are used to pressing a button – to touching it. Initially they won’t be mainstream, but the segment will contribute to the business overall. We don’t think it’s going to be niche, either – the segment may be smaller, but it will become more important as we go on. The same is true for the new 3D technology.

There have been reports of Acer recalling overheating Aspire Timelines. What was the cause of this and has the problem been sorted now?

We had a recall on some of the line, but not all of the units were affected. We’ve sorted out the problem and they are currently doing the fix on that.

You’ve also launched a number of new smartphones, which is a pretty crowded market already. What is it you’ll bring to the sector that will separate you from the crowd?

Our strategic direction is to become leader in the mobile solution area. On the one side of that we have ‘two hand’ devices like the notebook, so it’s a logical step for us to move into smartphones. If you think about the way you work on smartphones, it is very similar to a PC. What we believe is that the smartphone as a sector fits well with our wider direction, but we have no interest to be in the ‘normal’ phone market.

How large a proportion of your business overall will smartphones make up going forward? Can you become the market leader?

We’ve just started out in smartphones; nevertheless, it is an area in the mobile solutions direction, which belongs to our long-term strategy. In 2012 we want to become a $30 billion company. And we have an ambitious target for smartphones – this is not going to be niche for us; it will contribute significantly to our target.

What we are looking for is double-digit market share in the smart phone sector by 2012. We don’t want to be in a market where we have two or three per cent. I think the objective should be to look towards the next three years and aim to be in the range of ten per cent.

Tell us about the 3D technology you’ve been working on, and what products we are likely to see and when?

We are going to launch the 15-inch notebook first, then we will see the technology on the new all-in-one device, as well as on the new monitor. The monitor will launch at the end of November, while the other two will be out with the Windows 7 launch.

Where do you see Acer’s marketshare this time next year in the UK and around the world, compared to where it is now?

We plan to pass Dell in the third and fourth quarter (IDC and Gartner figures released since this interview show Acer has indeed overtaken Dell to take the number two global vendor spot). We still plan to gain some more market share with the multi-brand strategy. We are going to expand graphical improvements with the Packard Bell brand, which we haven’t rolled out in every country yet. And then we are also planning to expand our core business in the PC market, so we will get stronger in the business and professional sector. The Gateway brand will also be expanded in the future.

We plan to continuously gain market share on a global basis. In the UK, where we are still top, Acer has grown very fast in the last nine months. Our target is to become the global number one by 2012.

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