June 5, 2001 1:35 PM PDT

Acer reads Palm for signs of change

TAIPEI, Taiwan--Translating the Palm OS into thousands of Chinese characters by the end of the year is a big challenge, but it is probably not the biggest one facing Taiwanese electronics giant Acer.

By the fourth quarter, Acer plans to introduce its first Palm-based handheld, a model with built-in support for wireless data as well as both traditional and simplified Chinese characters.

Around the same time, Acer hopes to spin off its manufacturing arm and focus on being a brand-name maker of electronics gear, according to Jim Wong, vice president of new business development at Acer.

"We're using others' hands, but we are using our own brains," Wong told CNET News.com, referring to the company's move to give up its manufacturing arm.

Already, the two divisions of Acer are meeting separately with customers at Computex, the big Taiwanese computer trade show taking place here this week.

Though not terribly well known in North America, Acer has been among the world's top 10 computer makers. It has long had two separate businesses, building and selling computers and related equipment both under its own name and under contract for others--most notably, making PCs and displays for IBM in a multibillion-dollar arrangement.

But both parts of Acer's business have hit potholes in the slowdown of the global economy.

At $3.4 billion, sales from the company's manufacturing operations accounted for more than half of the computer maker's revenue last year, but that was down from the previous year's $4.1 billion. By contrast, the Acer-brand business increased in 2000, to $2.6 billion from $2.4 billion.

Acer's business has continued to weaken this year, with the company warning in the past week that overall group sales will fall short of prior estimates. The company said sales of its branded goods will fall as well.

"Demand in the U.S. market is declining at a rate faster than we had expected," Acer CEO Wang Cheng-Tang was quoted as saying in press reports.

To help offset slowing hardware sales, Acer is looking to expand into services and other areas. For example, Acer envisions the Palm-based handheld as the start of a broader mobile data business, and it plans to launch that device with wireless Internet service and access to corporate data in conjunction with PDA Hub, another Taiwanese company.

"You want to always be in sync," Wong said.

The company has not yet set pricing for the device or the service, saying it wants to better understand customers' needs.

For now the company is focused on the Asia-Pacific handheld market, specifically Taiwan and China.

"Acer is very cautious about expanding the business," Wong said. "When we make sure we have success here, then we will expand. Definitely you are going to see us worldwide in a few years."

Acer has been eyeing the handheld market for some time, flirting with designs for Linux and Microsoft's Windows CE but deciding to go with Palm because it is both open and unified.

But Wong left the door open to Acer's developing a Windows CE-based product down the road.

"Later on, if customers require it, we are not against it," Wong said.

 

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