PC Players will inject new levels of efficiency in Mobile Phone industry

Pragati Verma, July 27, 2009
The Financial Express
World’s third largest computer maker, Acer has recently jumped into the smartphone market. Unfazed by a slowdown in mobile phone sales globally and disappointing earning numbers from mobile phone companies, Acer mobility division head Aymar de Lencquesaing is confident of smartphone sales. “Consumers are increasingly accessing the Web from their mobile devices,” he reasons. Acer has recently launched five new feature-rich smartphones, in the price range of Rs 24,000 to Rs 35,000, in the Indian market. Hoping to sell more than a million smartphones by 2010, he is aiming to take a 6-7% share of the market in two to three years. In a conversation, he describes the new capabilities smartphones are adding.

Excerpts:

What prompted Acer to enter this already crowded market of mobile phones?

Many people are wondering why we would get into a business like mobile phones. But we think it is the right strategy for us and it is a logical thing for us to do. We are the worldwide number one in netbooks and number two in notebooks. Most people don’t realise this, but Acer’s core competence is mobility products. Our core business is mobile data devices and we think of smartphones as mobile data devices.

Today, the challenge is not to get voice on phone, but to get data applications on the device. Of the 4 billion mobile phones, only 300 million have smartphones. So, you have 3.7 billion people left who can hop onto smartphones. That creates enormous opportunity and there is room for multiple companies. We are hoping to sell more than a million smartphones in 2010 and take a 6-7 % share of the market in three years.

As companies like you and Apple move into phone arena, should we expect phones and PCs to converge soon?

Computing and handset environments are moving closer to each other and are beginning to converge. We PC makers have gone from desktop PCsto notebooks to netbooks and now smartphones, without giving on our earlier products.

There are only five big PC companies and actually only have a massive scale. Among this set, we are probably the only company that has made such a radical, strategic move. We are well positioned to tap into this gigantic opportunity.

Apple’s entry proved to be disruptive? Are you aiming to change the way mobile phones work?

We cannot compare ourselves to Apple. We can only hope to repeat what we have accomplished in the PC business. At the same time, new entrants can be disruptive as they have a new way of looking at things and bring in new business models. PC companies are used to running business at an much higher level of efficiency. It’s a business diktat there.

We see that there are opportunities in the smartphone segment where some players have not run business at same level of efficiency, as margins did not demand it. Overtime, as competition comes in, you will see better value proposition to consumers and business landscape change.

To begin with, our revenue stands at $17 billion. Our operating expenses are low compared to revenue. Margins are not outrageous but respectable. We can bring these to new segments. These are principals that can be applied to new segments. I don’t want to call it disruptive but these will inject new levels of focus into the market that will ultimately bring new price points. And please don’t equate this with entry level; we will have products that are leaders in their segment but come at a good value.

How do you segment the market today?

We do segmentation by usage. It’s not as though we are looking at the competition and then deciding to undercut. We look at specific segments and then try to figure out if 3 megapixel is enough or should it be 5; and if screen size is big enough and so on. And then we try to get the equation work.

I know that our segmentation is not foreign to most of the operators that we have spoken. We have broken the market into six segments.

Smartphones currently attract the early adopter crowd, which tends to be more tolerant than the mass market.

We have also conducted an extensive user study and the results are a reason for us to be optimistic. Survey showed that customers have issues with current products.

These include battery, security and synchronisation of addressbook. Our study also validates that there is a strong implicit demand for Internet connectivity on the go; this explains the success of a product like netbook. We will now offer it in a pocket-sized device.