Acer to slash 300 jobs as financial woes continue

Shares slump after audit finds abnormalities in channel inventory that will cost $150m

Acer is to slash 300 jobs in Europe as part of its plans to reduce costs. The firm has suffered a series of setbacks recently, including reduced sales forecasts and the resignation of chief executive Gianfranco Lanci.

Acer did not reveal in which countries the cuts would be made, but estimates that compensation will total $30m. The company hopes that annual operating expenses will be reduced by the same amount after the cuts.

The announcement comes as Acer was hit by more bad news after audits of its channel inventory found that equipment stored in warehouses for forwarding to resellers was higher than realised.

Acer has said that it will provide channel partners with $150m in sales allowances to let them clear the inventory, further hurting the company's financial position.

The audit also uncovered issues in the way Acer manages its channel inventory. As a result, chairman and chief executive JT Wang is forgoing his salary and 2010 bonus.

Furthermore, all Acer board members have agreed to take a pay cut of 50 per cent, and will propose that employee bonuses for 2010 be reduced by 40 per cent from $1.5bn to $900m to help alleviate the financial burden imposed by the losses.

Acer's share price dropped seven per cent in reaction to the news. Investors remain wary after the company cut its first-quarter PC sales forecast in March, which caused its share price to plunge by 18 per cent.

Acer to slash 300 jobs as financial woes continue

Shares slump after audit finds abnormalities in channel inventory that will cost $150m

Eszter Morvay, a research manager for European personal computing at analyst firm IDC, expressed surprise that Acer was being so public about its problems, adding that the move perhaps hinted at a change in strategy as tablets erode market share for laptops.

"Acer has always stuffed the channel with its products to help sellers offer lower prices. For four or five years this strategy worked well but, since around the third quarter of 2010, demand fell away as tablets started to appear," she told V3.co.uk.

"The fact they are being so open about the issues they are facing in the channel suggests they have looked at the European strategy and decided to clean it up, and this may mean a change of direction in the market too."

Morvay suggested that the loss of 300 jobs was unexpected as Acer has one of the leanest workforces of the major PC suppliers, and that it demonstrated the challenges the company is facing.

"One of the reasons Acer is so competitive on price is that it has such a small workforce of some 10,000 staff compared with, say, HP on 80,000. So while 300 staff cuts isn't a huge number, it's indicative of the firm's position right now," she said.

"It will be interesting to see how the company comes through the turmoil and what new strategies it develops, particularly with the likes of Samsung and Lenovo pursuing aggressive market strategies."