Betting Big on Little
Acer, Taiwan’s historical PC darling and one of the 13 vendors that launched in conjunction with Microsoft’s big November announcement, has been squawking a bit in the press over its new Tablet PC product. None other than Bill Gates is an Acer Tablet PC user, having cut his teeth on the technology last year with an Acer device.

Acer’s betting big on the adoption of the tablet – maybe too big. Acer Chairman Stan Shih is predicting a PC industry rebound that will begin late this year and gain rapid momentum in early 2003 – all driven by the tablet alone. Senior Director Cambell Kan expects the Tablet PC to be the default laptop within a few years. By next year, up to 20% of Acer laptops will feature the new design. "In three to four years, it will be 80%," forecasts Kan.

Analysts and other vendors aren’t so bold on the prospects. IDC research director Kitty Fok sees the tablets as an initial niche corporate machine. "The introduction of Tablet PCs will result in a minor push in demand, but it will not be significant," she pointed out. Ken Dulaney at Gartner predicts only 3% of notebooks purchased by 2004 will be tablets.

Spokesmen from competing vendors such as Fujitsu and Legend agree, likening the new device as "just another choice for the user" that’s not likely to kill off the laptop anytime soon, much as PDAs and laptops didn’t cannibalize the desktop as once predicted. Other critics question the positioning distinction of tablets between slimmer notebooks and more powerful PDAs emerging in the marketplace.

And there are plenty of other tablet contenders lining up. Though successfully courting Microsoft, Acer is competing with at least a dozen other prime-time debutantes (many of which have stronger brands in the U.S. and elsewhere) in becoming the Queen of the Ball.

Spinning Off – Into the Sunset?
Not only is Acer’s product focus in transition, but their corporate structure has also changed dramatically in the last couple of years. Shih has aggressively divested from non-profitable core businesses, spinning off numerous kid companies that have eclipsed the growth of the parent itself. The former Acer Labs division, pushed out and renamed ALi in May, is expected to grow by 27% to over $200 million this year. Wistron, its former contract manufacturing arm, has won contracts with Dell for its new PDA and with Microsoft for the popular Xbox console. And its former unit that contract manufactures cell phones, scanners, and other gadgets, is expected to make nearly $3 billion in revenue and is embarking on a brash new branding campaign under the name BenQ that defies Acer’s and Taiwan’s traditional steady image.