Dell unfazed by Acer's 'elasticity play'

Hardware maker's Asia-Pacific exec shrugs off threat from Acer as "elasticity play"; says rival's play for cost-conscious buyers by lowering prices may not last.
Written by Vivian Yeo, Contributor

SINGAPORE--Dismissing Acer's market gains as "elasticity play" and limited in reach and effectiveness, Dell Computer says its aim to be Asia's No. 1 PC vendor remains in sight.

During a call with regional journalists Friday to announce the company's fiscal first-quarter results, Stephen Felice, president for Dell's small and medium business (SMB) and former Asia-Pacific president, noted that the PC maker has chosen not to go down the path of lowering prices--as Acer has taken.

Dell's Taiwanese rival, in recent months, has made steady gains in unit sales and is poised to snatch the No. 2 crown from the U.S. PC maker.

"[Looking at] the way Acer went over the last quarter, [it] shipped a lot of units but didn't make investors very happy," Felice said. "We've chosen to go a different path--we're not going to sacrifice earnings in order to gain share."

"I don't believe that share is necessarily loyal or sticky. This is an elasticity play [that] only [addresses] the truly price-sensitive side of the market, and those customers can be won over in the future with better products and better services," he said.

Dell's Asia-Pacific business, including Japan, was "better than average" during its fiscal first quarter, according to Felice. The region recorded US$2 billion in revenues, falling 20 percent year-on-year. However, this value remained largely consistent across the last several quarters, he said.

The consumer segment reported a slight decline in revenue, despite a "very strong" unit growth over last year. The SMB and public sectors outperformed Dell's average across the regions, although the large enterprise business was hard-hit by the downturn.

Despite the competitive and economic pressures, Dell is still optimistic about becoming Asia's No. 1 PC maker within the next three years, Felice told ZDNet Asia. "[Last year], I thought we could get there within a three-year horizon. I still think we can get there within [a three-year period]--it's just maybe stalled for now because of the economic situation," he said.

Regardless, the company is cautious of the current climate, said Felice.

"We feel that right now is not the time to be trying to search demand, because it is not there. You see some of our competitors try to do that--you look at the issues with both Lenovo and with Acer…trying to push demand where it's not there, and having a significant negative impact on earnings," he said.

"While my desire would be to try to accelerate growth, there has to be a receptive market for that. And we don't feel like that's a prudent thing to do right now, so we've been more focused on a healthy balance of growth and profitability, and that I'm very satisfied with," he noted.

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