Acer Tumbles After Audit Finds Abnormalities in Inventory

June 02, 2011, 5:43 AM EDT By Weiyi Lim

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June 2 (Bloomberg) -- Acer Inc., the world’s second-largest maker of laptops, tumbled the most in more than 13 years in Taipei trading after the company said an audit found abnormalities in its inventory and account receivables.

The shares fell by the daily limit of 7 percent to NT$51.90, pushing the stock past Lead Data Inc. as the worst performer on the island’s benchmark index this year.

The findings, which will result in a $150 million one-time charge, further undermined investor confidence in a company that had cut its sales forecast twice and ousted its chief executive officer since late March. Last quarter, Acer posted its lowest profit in six years after the company lost sales to Apple Inc.’s iPads and HTC Corp.’s smartphones.

“This is obviously a mismanagement issue,” said Jenny Lai, an analyst at HSBC Holdings Plc. in Taipei. “It will be a challenge to regain investors’ confidence, especially since the company changed its financial forecasts a few times in the past couple of months.”

In its audit of the operations in Europe, the Middle East and Africa, Acer found “abnormalities” in inventory stored in freight forwarders’ warehouses and in account receivables in Spain, according to the company.

Regaining Trust

“These are necessary measures to get the company back on track and regain investors’ trust,” Vincent Chen, an analyst at Yuanta Securities Co., said in a report today. “Potential risk remains with Acer’s tablet inventory in the third quarter.”

Wang and the rest of the board of directors’ compensation will be slashed by 50 percent and the company will propose cutting employee bonuses by 40 percent, it said. Acer also plans to eliminate 300 jobs in Europe, the Middle East and Africa.

Acer’s share price will remain “under pressure,” according to Goldman Sachs Group Inc., which advises investors to sell the stock.

“At Computex 2011, Acer attracted fewer visitors compared to Asustek Computer Inc. and had fewer new products on display,” Henry King and Angel Wei, analysts at Goldman Sachs, wrote in a report today in reference to this week’s electronics conference in Taipei. “Without a strong product, we think Acer’s recovery could take longer than the market expects.”

Acer vaulted past Lenovo Group Ltd. and Dell Inc. to become the second-largest maker of personal computers in 2009 after a three-year buying spree that resulted in the purchases of Gateway Inc., eMachines Inc., Packard Bell BV, and Founder Technology Group’s PC business. Acer slipped to No. 3 last year.

--Editors: Garry Smith, Young-Sam Cho.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net; Young-Sam Cho at ycho2@bloomberg.net

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Hon Hai Tumbles After Explosion at Foxconn Factory in China

May 23, 2011, 2:05 AM EDT By Tim Culpan and Chinmei Sung

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May 23 (Bloomberg) -- Hon Hai Precision Industry Co., the maker of Apple Inc. iPhones and iPads, tumbled to the lowest in almost two years in Taipei trading after an explosion at a factory in Chengdu, China, killed three workers.

The company, Foxconn Technology Group’s flagship unit, dropped as much as 5.2 percent to NT$97.70, the lowest since August 2009. In Hong Kong, handset-manufacturing unit Foxconn International Holdings Ltd. tumbled as much as 5.7 percent.

The maker of Apple Inc.’s iPhones and iPads said the explosion, which also left 15 employees injured, started with combustible dust at about 7 p.m. on May 20. The incident comes a year after a spate of suicides at Foxconn’s main manufacturing base in Shenzhen prompted the electronics maker to raise wages and move more Chinese production inland.

“We expect Hon Hai’s original facilities in Shenzhen could quickly make up some of the shortfall from Chengdu by ramping up the idle capacity,” Kirk Yang, an analyst at Barclays Capital in Hong Kong, wrote in a note today. “We would see any resulting price weakness as a sensible time to add to positions.”

Foxconn spokesman Edmund Ding didn’t answer calls to his mobile phone. The company, which is working with local government officials to investigate the cause of the explosion, has declined to comment on the details of the accident beyond the statement.

‘Serious’ Condition

“All operations at the affected workshop remain suspended and production at all other workshops that carry out similar processing functions have also been halted pending the results of the investigation,” Foxconn said in its statement. “All other production operations in our facilities in China continue operating normally.”

Sichuan Provincial People’s Hospital has admitted four workers in “serious” condition with large areas of their bodies burnt, said Li Wei, a doctor at the hospital burn unit, said by phone today. He declined to comment further.

Apple, the world’s second-biggest company by market value, said it’s in contact with Foxconn to investigate the incident.

“We are working closely with Foxconn at this point to understand what caused this terrible event,” Steve Dowling, a spokesman for Cupertino, California-based Apple, said in a May 20 phone interview. “We are deeply saddened by the tragedy.”

The $2 billion plant where the explosion took place opened in October, Xinhua reported May 20. The facility makes Apple’s iPad 2, the Beijing-based Economic Observer reported on its website, citing unidentified company workers.

Police in Chengdu said they concluded preliminarily that the explosion, in a polishing workshop, wasn’t intentionally caused, China News Service said.

--With assistance from Weiyi Lim in Singapore, Jiang Jianguo in Shanghai. Editors: Young-Sam Cho, Dave McCombs

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Chinmei Sung in Taipei at csung4@bloomberg.net.

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.

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