UPDATE 3-Acer replaces CEO after weak outlook triggers selloff

* Differences over future development cited as reason

* Chairman J.T. Wang to be acting CEO

* Acer to now focus on tablets – Chairman Wang

* Operating profit margin may fall to 0.5 pct on inventory
issues-analyst

* Shares of Acer plunged 18 pct in last four sessions

(Edits, adds source comments on management dispute)

By Clare Jim and Argin Chang

TAIPEI, March 31 (Reuters) – Taiwan’s Acer , the
world’s No. 2 PC vendor, replaced its chief executive in a
surprise move on Thursday, barely a week after it gave a
downbeat outlook that wiped more than $1 billion off its market
value in four days.

Its Italian chief executive, Gianfranco Lanci, will leave
the company immediately due to differences over the strategy
needed to counter the runaway success of the tablet market,
which has cannibalised Acer’s profits.

Chairman J.T. Wang taking over in an acting capacity, Acer
said in a statement.

Acer, one of Taiwan’s best-known brands, has been a dominant
force in the PC business, particularly in the low-cost notebook
segment. It said it will now focus on the tablet sector as well,
an area where it has been slow in gaining traction against rival
products such as Apple’s hot-selling iPad.

“The industry has changed too much, that’s why our
successful formula in the past has to be adjusted,” Wang told a
news conference announcing the change.

“We will not keep talking about being the world’s No.1
notebook maker anymore. Rather we need to a leader in mobile
devices. We’ll pursue brand value and profit and then we’ll talk
about quantity.”

Acer launched its new tablet PC, the Iconia Tab, in February
and the company said last week that new tablet models scheduled
to launch in the second quarter may improve sales. Earlier this
year, it said it aimed to sell 6 million tablets in 2011.

SCEPTICAL MARKET

Analysts said Acer would face a tough road ahead in trying
to make inroad into the hotly contested sector.

“The management change shows that Acer is taking
responsibility in what has happened recently, but whether it is
positive to the company in the long run will depend on who takes
over as the CEO and the measures he is going to take,” said
Bevan Yeh, a senior fund manager of Prudential Financial
Securities Investment Trust.

“Acer does not have an edge in the tablet market. That’s why
the market did not respond positively to its bet on mobile
devices as the growth momentum in the second half of the year.”

Acer’s operating margin in the first quarter will drop to
0.5-1.5 percent from a 2.8-3 percent range in the previous six
quarters because of inventory issues, according to an analyst
who attended an Acer briefing.

The surprise news of Lanci’s departure came after shares of
Acer plunged almost 18 percent in the four days since it said
first-quarter sales would be worse than expected and second
quarter sales would be flat, triggering a wave of analyst
downgrades. [ID:nL3E7EP1RZ] [ID:nL3E7ES1FJ]

In January, Acer reported fourth-quarter profit below
expectations, affected by unfavourable weather and economic
conditions in Europe.

Citi raised concern about the company’s continued failure to
meet its own guidance, calling Acer the biggest victim of the
tablet cannibalisation of the consumer notebook.

A source with knowledge of the matter said tension between
Wang and Lanci have been rising for some time.

“It is a very high profile dispute which led to much
indecision in the end. One big dispute included investment
amount in tablet PCs, another big one was that Acer had actually
approached NEC to acquire its PC business ahead of
Lenovo , but NEC went with Lenovo in the end,” the
source said.

Lanci joined Acer in 1997 after it took over the notebook
division of Texas Instruments , for whom Lanci worked at
the time. He became CEO in 2008 and has been credited with
helping Acer make it to the world’s No.2 spot through a focus on
low-cost laptops.

Apart from steering Acer towards the new strategy, any new
CEO will face management challenges in its global operations.

“Gianfranco built the entire Acer empire in Europe, so most
of the people were hired there. So how the new CEO manages those
people will be quite a challenge,” said a technology analyst in
Hong Kong who declined to be identified.

(Additional reporting by Lee Chyen Yee; Editing by Matt
Driskill and Lincoln Feast)

UPDATE 3-Acer replaces CEO after weak outlook triggers selloff