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Daiwa cuts Acer projections amid profit concern

TAIPEI -- Taiwan's Acer Inc. may post fewer earnings in 2012 and 2013 due to a slower-than-expected recovery in the PC brand's operating profit margin, Daiwa Securities Capital Markets said in a note recently.

The Japanese brokerage slashed its estimates for Acer's earnings per share (EPS) in 2012 by 54 percent to NT$0.69 (US$0.02) and in 2013 by 16 percent to NT$2.34, given Acer's disappointing results for the second quarter of this year.

The cut in earnings also led to Daiwa's revision of its six-month target price for Acer from NT$40 to NT$35, while the brokerage kept a “buy” rating on the stock.

However, Daiwa expects robust sales of Acer's new products in the fourth quarter of 2012 as consumers await new Windows products, which will lead to double-digit revenue growth over the previous quarter.

“Still, our expectation of continued growth in Acer's market share is unchanged, with the company focusing on the mainstream-PC market rather than tablets,” Daiwa analyst Christine Wang wrote in the note.

During the April-June quarter, Acer's notebook computer shipments rose 1.2 percent from one quarter earlier to 7.57 million units, giving it a 15.4 percent share of the global market, the highest of any vendor in the world, research firm Gartner Inc. said.

Also, the Taiwanese PC maker's shipments to the European region gained 3.8 percent over the first quarter, making it the region's largest notebook supplier with a 20 percent share, according to Gartner.

Wang expects Acer's revenue to turn positive on an annual basis in the fourth quarter of 2012 and accelerate significantly from the first quarter of 2013. Subsequently, she recommends purchasing the stock prior to the fourth quarter of this year.

Acer, the world's fourth largest PC vendor, posted about NT$56 million in net profit, or NT$0.02 per share for the April-June period, down from NT$331 million or NT$0.12 per share recorded in the first quarter.

The company's second-quarter EPS failed to meet the market expectation of NT$0.19 and British bank Barclays PLC's forecast of NT$0.13.

Acer attributed the lower earnings in the global PC market in the second quarter to its appearing weaker than the previous quarter, which affected buying in Europe, the United States, China and other markets in the Asia Pacific region.

It expects sales to recover, however, in August and September on the back of the launch of new PC models bundled with Microsoft Corp.'s Windows 8 operating system.

Shares of Acer closed 0.90 percent lower at NT$27.5 in Taipei Friday.

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