By Sheena Lee

TAIPEI (Reuters) - Taiwan's Acer Inc , the world No.3 PC vendor, on Wednesday posted a drop in first-quarter profit after a one-off investment gain last year, but showed solid core business growth amid a recent aggressive expansion.


Competing against Lenovo , Hewlett-Packard , and Dell Inc , Acer has expanded into fast growing consumer markets such as China, India, Russia, Latin America and the Middle East.

Acer said the fear and uncertainty in the wake of the U.S. subprime mortgage crisis had begun to ease, and its retail sales had not been hit by a slowing U.S. economy.

In line with its aggressive expansion drive, Acer expects its notebook PC shipments to rise more than 40 percent this year from 2007, Chairman J.T. Wang told reporters at a conference to discuss the company's results.

Acer posted a January-March net profit of T$2.95 billion ($97 million), lower than T$5.66 billion a year ago, but beating a market forecast for T$2.51 billion, according to eight analysts surveyed by Reuters Estimates.

First-quarter operating income rose to T$2.74 billion from T$1.95 billion a year ago.

"They're in fairly good shape in the first quarter and its fastest growing area is still Asia Pacific, but Europe demand could slow down a bit at the end of Q2," said a JP Morgan analyst, who declined to be named.

To diversify its product line, Acer said it planned to sell low-cost PCs this year, following a popular reception for such models from local rival Asustek Computer .

Acer also said this week it plans to launch laptops with WiMax capabilities in June or July as the new high speed wireless technology could be a fresh catalyst for the notebook sector.

In addition to cheaper computers and WiMax laptops, Acer said it wants to get more involved in the smartphone market after its acquisition of Taiwan portable device maker Eten Information Systems Co for $290 million last month.

Acer shares fell 2.31 percent to T$63.50 ahead of the results. The main TAIEX index ended down 0.32 percent.

In January-March, shares of Acer fell 14 percent, while the main board edged 0.8 percent higher. Chinese rival Lenovo stocks dropped 29 percent in the same period as the Hong Kong Hang Seng Index declined 18 percent.

Acer, which has bought U.S. computer brand Gateway Inc and Paris-based Packard Bell, dethroned Lenovo last year as the third largest PC brand in the world, grabbing market share through the acquisitions.

Researcher IDC has said worldwide PC shipments rose 14.6 percent in the first quarter, above a previous estimate for 13.2 percent growth.

The global PC market is expected to ship 10.9 percent more computers this year than in 2007, said researcher Gartner, below an earlier estimate for 11.6 percent growth.

(US$1=T$30.3)

(Editing by Ian Geoghegan and Keiron Henderson)
© Copyright 2007 Reuters.

Photo:
A man walks past an Acer advertisement at a computer mart in Taipei April 23, 2008. Acer, the world's third-largest PC vendor, expects its laptop shipments to rise more than 40 percent in 2008, as demand for notebook PCs pick up in emerging markets, Chairman J.T. Wang said on Wednesday. REUTERS/Nicky Loh