Taiwan's Acer to spin off OEM unit

By spinning off the OEM unit and focusing on its own branded products, Acer hopes to streamline operations

By Staff and wire reports

TAIPEI, Taiwan -- Taiwan's Acer plans to spin off its contract or original equipment manufacturing (OEM) unit to weather the global slump in PC sales.

Shareholders have agreed to a plan that will split the company into two divisions -- one selling products under the Acer brand, and the other manufacturing products under contract to other companies.

The contract manufacturing unit, to be named Wistron, will be established by the end of this year or in early 2002.

Acer plans to sell as much as 70 percent of the unit through an initial public offering next year.

Stopping the rot

By spinning off the OEM unit, Acer hopes to stop the rot and streamline its operations.

"High PC growth doesn't exist anymore. It's more important to improve the quality of management than to expect overall growth in the market," said Acer chairman Stan Shih.

Shih said a similar strategy had paid off for Acer's rivals.

"Our competition has gradually recovered after dividing the contract manufacturing and brand-name businesses," he said.

Acer, like many other makers, has been hit hard by the end of the global boom in personal computer sales and is struggling to react to the rapidly changing market.

U.S. maker Compaq announced on Monday that it was undergoing a transformation to move away from hardware manufacturing to business services.

Research firm IDC estimates that Acer is the world's ninth-largest PC maker, and eighth in notebook computers.

Sales in the first five months of this year fell 35 percent from the same period a year earlier to $871.5 million.

Acer shares lost T$0.40 to hit T$22.40 in midday trading Wednesday.

Reuters contributed to this report.