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Acer’s US$150m inventory hit

by Stuart Wilson, Wednesday 8 June 2011

Hardware vendor Acer admitted recently that it will take a US$150m financial hit to deal with excess inventory in its EMEA channel. What went wrong and how did it happen?

One channel insider with detailed insight into Acer’s EMEA operation gives us their personal opinion on what could have created such a significant inventory issue for the vendor:

“Acer said in the statement that a recent internal audit and investigations uncovered that inventories in some of its warehouses in Europe were higher than previously booked. I can only imagine that this was phantom ‘orders’ at [logistics provider] Kuehne + Nagel waiting for the customer to place the real purchase order (PO), which had been a standard practice for Acer HQ, while account receivables at its Spanish operations were more than previously reported.

I can think of ways that DSO would be understated (typically credit and re-invoice the goods to restart the clock) but I can’t think how they would understate the receivable. Normally prices were inflated – not deflated which leaves many open issues.

Similar to many distributors, as long as sales are continually ramping, they have the cash flow to enable previous quarters’ payments to be met even when trading at a loss, but this is unsustainable if you have more than two quarters of decline.

Top EMEA management may have started to believe their own version of reality and needed to back that up by ensuring they had ‘yes’ men in all the roles of responsibility and so started to remove many non-Italians from senior management roles and replace them with ‘more suitable’ people.

This could have resulted in a destruction of the company from the inside. This was a company that had grown by using best practices and people from a multicultural environment to drive the company forward.

Walter Deppeler is deputy head of EMEA but he is a nice guy and may have been kept as the ‘token’ non-Italian senior manager. Deppeler stayed as deputy head of EMEA with the Italians basically running UK, France, Spain, Turkey and the Middle East.

Going forward a real issue in focus is now at play as the Taiwanese want to be the leaders in the tablet and mobile market, forsaking all of the opportunities created by Acer in other product segments.

The product team is now being led by the Taiwanese who are manufacturing-focused rather than client facing and so many issues are already coming to light with the first tablet models and accessories being uncompetitive in the market.”

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December, 2020

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