Taiwan's Acer Inc reported a worse-than-expected quarterly loss, the first in company history, hurt by charges for an inventory write-off and reorganization, and said it would be impossible to break even for the full year.
Acer has been a dominant force in the PC business, particularly in the low-cost notebook segment, but has failed to counter the runaway success of tablets such as Apple's hot-selling iPad that have cut into PC sales and hurt profits.
The company has been refocusing on mobile devices to drive growth after a troubled first half that saw the acrimonious departure of its chief executive following a row over the company's strategy and a series of cuts to its shipment forecasts.
The world's No.2 PC vendor posted a net loss of T$6.79 billion ($234.3 million) in April-June, much wider than the consensus forecast of a T$3.3 billion loss from six analysts polled by Reuters.
The unaudited net loss figure compared with a net profit of T$1.19 billion in the first quarter and earnings of T$$2.65 billion in the same period a year ago.
In the second quarter, Acer made efforts to further downsize channel inventory due to stagnant European and U.S. economies, and the slow PC market, the company said in a statement.
Additionally, the company paid considerably in senior executive severance pay. Consequently, Acer suffered higher-than-expected loss in the second quarter, it said.
Chairman J.T. Wang told a subsequent investor briefing that Acer will still see a loss in the third quarter, though it would be better than the second quarter.
In July, J.T. Wang had indicated that the company would report a loss in the second quarter before returning to profit in the third and post a small full-year profit.
Acer said in June it would take a $150 million charge to write off inventory and doubtful payments in Europe and will cut 300 jobs there.
Acer should be able to post a small profit in the third quarter on inventory clean-up in the channel, but full-year, it should still see a loss, said HSBC Analyst Jenny Lai.
In the longer term, Acer might benefit from U.S. rival Hewlett-Packard Co's plan to spin off its personal computer business, analysts say.
Acer should benefit from HP's share the most in Europe because it's the second biggest in consumer space in the region. Where Dell would benefit in the U.S. and Lenovo in Asia, HSBC's Lai said.
But Acer's sharply fallen margin has to go back to the normal level first, otherwise a rise in shipment would not help its profit much, she said.
HP, the world's largest PC brand, said last week it is exploring the possibility of spinning off its Personal Systems Group, a business valued by some analysts at $10-$12 billion.
HP's PC business would take the new management 1-2 years to integrate, which would give other top five brands time to grab market share, including Acer who should need only 1-2 quarters to clear its inventory, said an analyst who declined to be named because he was not authorized to speak to the media.
Macquarie analyst Andrew Chang said in a report that recent checks indicate Acer has no new competitive products to launch in the third quarter to lift momentum and margins.
Macquarie expects flattish revenue growth in the third quarter from the previous quarter and a 29 percent drop from a year ago.
He said a turnaround for Acer could be possible next year if it could normalize sales in Europe, boost share in China's corporate PC market, launch new products at a quicker rate and grasp the new wave when Microsoft formally launches Window 8 next October.
Acer shares have fallen 65 percent this year to Wednesday close in a broader market down 16.4 percent. Cross-town rival Asustek has gained 6.8 percent.
(Editing by Vinu Pilakkott)