Faced with PC slowdown, Acer writes off inventory

Faced with reduced orders from IBM and slowing demand for PCs, Acer on Tuesday announced plans to write off AUS$72.7 million worth of inventory during the second quarter of 2001. The company is taking the charge as part of a larger $218 million write-off planned for the second quarter, it said.

"The inventory that Acer is writing off is excess inventory, largely accounted for by stuff made for both IBM, which decreased its order last year, and the Acer brand," said Acer spokeswoman Lauren Swartz in an e-mail.

"The excess inventory is also a result of the decreased demand for PCs," Swartz said, adding that the excess inventory includes all types of PC-related components.

"There's probably not much of an impact on their end users or customers (from the write-off)," said Tim Arowitsch, executive director at Goldman Sachs in Hong Kong, describing the announcement as solely financial in nature. "It's not indicative of any product problems."

Acer's inventory levels peaked during the third quarter of 2000, amounting to a total of $559 million, Swartz said. By the fourth quarter, Acer had managed to reduce its inventory to $279.5 million, a downward trend that has continued, putting the company's current inventory levels at $218 million, she said.

Acer's inventory levels are usually kept between $223.6 million and $279.5 million, Swartz added.

In addition to the excess inventory, the charges contained in the write-off, which Acer calls a "resources reallocation," includes $95 million in goodwill from purchasing overpriced shares in technology-related companies and $50.3 million worth of software, services, royalties, and charges from factory closures and relocation, according to a company statement.

Acer balanced the write-off announcement by reporting that during the second quarter of 2001 it will record a profit of $271 million from the sale of holdings in Taiwan Semiconductor Manufacturing and Taiwan Cellular.

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