Technology

Microsoft tablet drive rattles PC maker

7 Aug, 2012

Before Microsoft held a press conference in June to announce its own-brand Surface tablet, the software company gave PC makers such as Acer advance warning that it was going to start competing with them â€“ but it was not much of a heads-up.

Campbell Kan, Acer's president for personal computer global operations, said Acer was made aware of Microsoft's plans only shortly before the press conference, and Microsoft has still not told Acer what price the Surface will sell for in retail outlets.

The lack of communication between the two companies on the Surface contrasts with their collaboration on successive versions of Microsoft Windows. Acer, like other PC companies, are given an early look months in advance of the launch so that they could plan new PC models around it. Windows 8, the latest version, is due out by October.

Taipei-based Acer has clearly been rattled by Microsoft's hardware ambitions. JT Wang, chairman and chief executive, says the move will be "negative for the worldwide ecosystem".

"Microsoft hasn't given us a very clear picture," Mr Kan said. Do they just want to show a new concept to the market and are they going to still work with [PC makers]â€‰.â€‰.â€‰.â€‰or are they going to get into the hardware business?"

But in an illustration of Acer's apparent love-hate relationship with Microsoft, the world's fourth largest computer maker by shipments is pinning hopes for a revival on tablets and notebooks running on Windows 8.

Two years ago, Acer stood poised to become the world's top PC maker. Globally, it was virtually even with Dell as the second-biggest, and just behind Hewlett-Packard, at the top spot. In Europe Acer was the biggest notebook PC maker.

But a combination of being too slow to adapt to the challenges posed by smartphones and tablets, and misjudging the strength of consumer IT spending, meant that it has now fallen to fourth place globally. It last year parted ways with Gianfranco Lanci, its former chief executive, "over strategic differences".

To turn round its fortunes, Mr Wang is betting on "Ultrabooks" â€“ slender, power-efficient notebooks â€“ running on the touch-enabled Windows 8 operating system.

Ultrabooks were Intel's big push to revive the moribund PC industry but they have so far disappointed. Fewer than 1m were sold in 2011, according to iSuppli, and they made up only 2 per cent of all notebook sales over the Christmas period, compared with the 40 per cent predicted by Intel.

Mr Wang said this was because prices were too high and the current Windows version did not have the right features. "The Ultrabook with Windows 7 was not attractive enough. Growth was not as good as expected," he acknowledged.

However, he was bullish on Ultrabooks next year, when he said entry prices would fall to $699, compared with $800-plus models now.

"With this magic [$699] number and Windows 8, the consumer will start to buy," he said.

Mr Wang singled out Microsoft's work on touch screens in its latest operating system as a key differentiator for consumers.

"No matter who punches them, they just work," he said of the Seattle-based company. "This time we see different features and form factors for Windows 8. That is a good thing."

Acer is planning a host of new PC products that take advantage of Windows 8's new interface, which was designed with touch screens in mind, and is confident it will be one of the first to come to market with Windows 8 PCs with touch screens.

But in the longer term, Acer will have to figure out how to position itself in the new era of touch and mobile computing, Mr Kan said. It is a question that has taken on "more [of a] sense of urgency" since Microsoft announced its Surface tablet, he added.

"We have talked about convergence of technology for 20 years but it's just happening now," said Mr Wang.

Mr Wang said the move to a richer consumer experience will be beneficial to Acer: "We are not a technology leader. We are closer to the end user."

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