Acer Reduced to Junk by Fitch After Cutting Sales Forecast

July 20, 2012 by  
Filed under Every thing you Need to Know

Acer inc. (2353), the world’s third-largestcomputer maker, had its credit rating cut one level by FitchRatings to junk grade less than a week after lowering its growthforecast for the year.

Fitch changed Acer’s long-term foreign and local currencyrating to BB+ from BBB-, with a negative outlook, meaning afurther downgrade is possible, it said in a statement today.

“This is a structural issue, because the company is quiteconcentrated in the PC market but does not have strongperformance in terms of the non-PC area such as handsets, mediatablets or services generated from enterprise customers,” KevinChang, a Taipei-based credit analyst at Fitch, said by phonetoday.

A weakening economy and a more cautious view towardMicrosoft Corp.’s new operating system prompted the maker ofTimeline and TravelMate computers to more than halve its growthforecast for the year last week. Intel Corp. (INTC) (INTC), the world’sbiggest chipmaker, scaled back its annual sales estimateyesterday as personal-computer demand fails to rebound amongconsumers in the U.S. and Europe.

Henry Wang, a spokesman for Taipei-based Acer, declined toimmediately comment on the report.

The yield on Acer’s August 2015 convertible bond narrowedto 1.21 percent today before the announcement from a high of4.29 percent on Oct. 6, which was two weeks before posting itssecond consecutive quarterly loss, according to Barclays Plcprices. Its third-quarter net loss of NT$1.1 billion ($37million) followed a second-quarter loss of NT$6.79 billion.

Acer posted its first annual loss on record last year afterwriting off about $300 million in inventories in Europefollowing faltering sales amid the increased popularity of AppleInc.’s iPad.

“They are facing additional challenges this year such asMicrosoft and Google also launching tablets that will getattention from consumers and maybe competing for the smallbudget that customers have,” Chang said. “While the PC is notthat popular in front of general consumers, the company could bestruggling in terms of recovering the profitability it hadbefore.”

Acer’s shares fell 2.5 percent to NT$27.50 in Taipeitrading today before the announcement, the lowest level sinceJune 2003. The stock has declined 22 percent this year comparedwith a 0.3 percent drop in the benchmark Taiex Index. (TWSE)

Acer had a cash balance of NT$60 billion at the end ofMarch, “comfortably covering” its total debt of NT$23 billion,Fitch said in the statement.

To contact the reporter on this story:Tim Culpan in Taipei at .

To contact the editor responsible for this story:Anand Krishnamoorthy at .

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