Acer Inc. share price up, ends losing streak after minor first-quarter profit

Acer Incorporated, the worlds fourth-largest personal computer manufacturer by sales, defied analysts expectations and swung back to profit in the first quarter as the company trimmed costs and sought ways to handle worldwide PC sales decline.

The Taiwanese PC maker reported on Thursday a net profit of 1 million New Taiwan dollars ($33 000), rebutting analysts projections for a loss of NT$1.17 billion. However, this was well behind last years NT$ 450 million net profit during the comparable three-month period. Revenue for the first quarter slid to NT$ 76.72 billion from NT$ 92 billion a year ago.

Once a leader in PC sales, Acer has reported either losses or minor profits in every quarter since early 2011 and its operating margin hasnt surpassed 0.3% ever since. However, operating income rebounded to NT$ 127 million after three straight quarters of losses due to the companys cost reductions and more effective control of inventory.

The Taiwanese company has found it harder than its rivals, such as Lenovo Group Ltd, to transition into the mobile segment and also lost market share in the traditional PC market. Acers PC shipments fell by an annualized 20.2% in the first quarter, Reuters reported, compared to a much more moderate 4.4% decline in the overall market. At the same time, Acers main competitors – Lenovo Group Ltd, Asustek Computer Inc, Hewlett-Packard Co and Dell Inc. increased their market presence on the back of Acers retreat.

Apart from the earnings report, the company also released a list of potential new board members, one of which may replace chairman Stan Shih, who recently announced his retirement. Mr. Shih oversaw the appointment of Jason Chen as CEO in December, the latest in a series of executive shifts over the last years.

One of Mr. Chens first steps to turn the company back to profitable was to begin cutting costs, starting with a 30% reduction of senior executives salaries. The PC maker also announced in November it would reduce its workforce by 7% and few analysts expected these measures could lead Acer out of the red so soon, while sales continue to contract.

However, Chen and Shihs push to help Acer gain on its largest competitors, including in cloud computing, has so far failed to spark optimism among investors about the companys brighter outlook. Nevertheless, analysts saw the swing to profit as a sign that company might be on the right track to a slow recovery.

Acer Inc. rose by 1.04% on Thursday in Taiwan to close the session at NT$ 19.40, marking a one-year change of -21.93%. The company is valued at 54.43 billion New Taiwan dollars. According to the Financial Times, the 22 analysts offering 12 month price targets for Acer Incorporated have a median target of NT$ 13.75, with a high estimate of NT$ 29.00 and a low estimate of NT$ 10.00. The median estimate represents a -28.39% decrease from the previous close of NT$ 19.20.