Acer in serious trouble

As the world’s third-largest maker of laptops, it is still not understandable why things like this could happen to Acer. Its shares tumbled the most in more than 13 years in Taipei trading after the company said an audit discovered abnormalities in channel inventory stored in freight forwarders’ warehouses and in the accounts receivable from channels in Spain and other countries. The shares fell down to NT$51.90, pushing the stock as the worst performer in its place this year. The total lost would sum up to $150 million, further undermined investor confidence in the companies stability. It was a mismanagement issue just like the incidents before this. Acer dismissed its chief executive officer, Gianfranco Lanci, in March and changed its financial forecasts a few times in the past couple of months. Acer also posted its lowest profit in six years after the company lost sales to Apple‘s iPads and HTC and Samsung in the smart phone category.

Its Chairman and chief executive officer J.T. Wang said in a statement that he was taking full liability for the loss by fully relinquishing his salary from his position as a board director and his employee bonus for last year. The rest of the board of directors’ compensation will be reduced by 50 percent. Acer also plans to eliminate 300 jobs in Europe, the Middle East and Africa. Compensation, including severance pay, will cost the company up to $30 million. Apart from that, employee bonuses will also drop. However, the cash dividend of will remain unchanged to protect shareholders’ interests. The company will provide those channels with $150 million in sales allowance to clear inventory.

It will be a challenge to regain investors’ confidence for Acer. These are essential measures to get the company back on track and regain investors’ trust. Risks remain with Acer’s tablet inventory in the third quarter. Acer’s share price will remain under pressure. Without a strong product, its recovery could take longer than expected. To lend support to its share price, Acer announced a new share buyback plan, aiming to repurchase 27 million of the company’s shares on the open market until August 1 at between NT$55 and NT$80 per share.