The move by the Taiwan-based company makes sense, but it forces the industry into a price war at the lowest end of the business where margins are already squeezed.
According to The Wall Street Journal, “Acer Inc. said it expects shipments of its personal computers to rise 25% to 30% in the second quarter from a year earlier, boosted by demand for low-cost laptops.”
If Acer has any success, it will put US PC companies Dell (DELL) and HP (HPQ) in a position where they will need to respond with more sub-$1,000 laptops. Both firms are already facing pressure from the proliferation of inexpensive netbooks, many of which retail for $300.
Hewlett-Packard can afford the challenge because it is in a broad range of tech businesses including printers, servers, and IT services. Dell does not have the same diversity, so it is likely to suffer the most in responding to Acer’s plans. Wall St. already despises Dell, which trades just above $10, down by about 60% from its 52-week high.
Douglas A. McIntyre
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