Dell is fed up with losing ground to Acer. Last year Dell lost its spot as the world’s second-largest computer maker to its Taiwanese rival, lagging behind Acer in market share for the first time ever. As of the fourth quarter of 2009, Dell had just 12.4 percent of the global market, according to market research firm IDC, compared with 13.4 percent for Acer and 21 percent for Hewlett-Packard.
While Acer executives, including Chairman J.T. Wang, are already talking about how they’re going to close the gap with HP, Dell isn’t giving up on recovering its No. 2 spot, says Stephen J. Felice, Singapore-based president for the Dell division focused on consumers and small and midsize businesses. And Dell hopes to claw back lost ground without sacrificing profitability. “We are not ceding that second place,” he said on a conference call with reporters on Feb. 19. “We see a way to get back to leadership position but will do it in a more measured way.”
Dell executives want to avoid following in the footsteps of Acer, which has grown largely because of its strength in low-cost netbooks and other inexpensive computers. “Acer has had a focus on low-end products, but the operating margin they work at is substantially lower than ours,” Felice said. “We don’t think that’s the right strategy for our shareholders.”
Pressure on Profit Margins
Acer’s share gains aren’t helping Dell investors much either. Dell’s fourth-quarter profit dropped 4.8 percent, to $334 million, the company reported on Feb. 18. Dell’s gross margin of 17.4 percent was also below the 18 percent expected by analysts, Bloomberg News reported. And the profit picture isn’t likely to improve soon. Margins “will be under pressure short term with increased competition from the likes of Acer and, to a lesser degree, Hewlett-Packard,” Ashok Kumar,…