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Barclays Capital maintains `overweight' rating on Acer shares

2012/05/26 20:23:03

Taipei, May 26 (CNA) Barclays Capital has maintained an "overweight" recommendation on shares of Acer Inc., one of the world's leading personal computer vendors, on expectations of an improvement in the company's bottom line.

In a recent research note, Kirk Yang, head of the Asia ex-Japan tech hardware research at Barclays Capital, also left unchanged a target price of NT$45 (US$1.52) for Acer shares.

Acer closed flat at NT$29.50 with 9.62 million shares changing hands on the Taiwan Stock Exchange Friday, when the weighted index ended down 0.74 percent at 7,071.63 points.

Yang said Acer has devoted tremendous efforts to making critical changes in its operations such as inventory reductions, a management reshuffle, rebuilding of its global distribution network and an adjustment in its product portfolio.

Acer incurred NT$6.6 billion in net losses, representing a lossper share of NT$2.52, for the whole of 2011 after it spent US$150 millionin a one-time write-down to clear inventory in its European operationsin the second quarter.

The company plunged into the red in the second and third quarters of last year, but swung into profit in the fourth quarter and continued the upswing in the first quarter of this year.

Its earnings per share for the fourth quarter of last year stood at NT$0.03 and rose to NT$0.12 in the first quarter of this year.

Yang said that although the pace of the improvement in operations so far this year has appeared slower than the market had previously expected, he remained upbeat about Acer's earnings outlook for the second half of this year.

He added that Acer's sales are expected to grow strongly in the second half to boost its profit margin to a normal level in the fourth quarter.

The analyst said Acer is expected to unveil new PC and ultrabook computer models at the upcoming Computex Taipei, the largest computer trade show in Asia, scheduled to open June 5.

He said that as the new models will be equipped with Intel's Ivy Bridge processor or Microsoft's Windows 8 operating system, they areexpected to become a driver for Acer's sales growth for the secondhalf of the year.

He added that some devices that will be loaded with Acer's cloud technology are expected to serve as an additional catalyst for sales.

Despite the financial turmoil in Europe, which has dragged down the global demand for high-tech devices, Acer Chairman J.T. Wang said his company has maintained an earlier estimate that sales for the second quarter will grow up to 5 percent from the first quarter, while its operating margin is expected to rise above 0.5 percent from 0.1 percent recorded a quarter earlier.

Wang said sales for 2012 are expected to grow 10 percent from a year earlier, with the fourth quarter's gross margin and operating margin at 10 percent and 2 percent, respectively.

(By Lo Hsiu-wen and Frances Huang)