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Acer India eyes Rs 500 crore revenue from government biz this quarter

Monday, 5 May 2014 - 9:40am IST | Agency: dna

Commercial segment now makes up 60% of revenues – with government business slated to contribute to 47% of that in this quarter

Given the steady decline in the PC business, traditional hardware vendors are turning to other avenues of income to fund growth. So while number one PC vendor, Lenovo decided to grow its smartphone business, even snapping up Motorola from Google, another prominent brand – Acer has decided to focus on its strengths in the enterprise business and largely target government projects in that bracket.

Explaining the shift in focus to the government vertical, S Rajendran, chief marketing officer, Acer India said, "In the last 2.5 years, there have been headwinds in economy, which has had a related impact on the consumer space which has witnessed most of the PC decline. Thus, we decided to focus more on enterprise (relationship business in our parlance) and within this the government vertical was the most promising – given its planned expenditure for e-governance, PSUs, PSU banks, or government- enabled education. This was also one vertical that was not so prone to the vagaries of the consumer buying sentiment with fast-changing form factors."

In a recent report, IDC said the APAC PC market saw a decline for the eight consecutive quarter, declining 8% sequentially in the quarter ending March and 11% year-on-year in 2014 to reach 23.8 million units, with Acer coming in at number five in the overall APAC PC vendor industry, with a 6.5% market share, as compared to 7.6% in the last quarter and an annual decline in PC unit growth of 31.6%.

Rajendran continued, "This strategic focus has really helped us to become a big player in the government space for the last 6-8 quarters, where we take the lead among our peers with a 25-38% market share of this business. For Acer, too, the enterprise business (of which government is a large part), contributes 60% of its overall revenues, while consumer business makes up the remaining 40%."

He added, "The government is bringing in a lot of initiatives to improve PC penetration at a macro level, given that penetration is barely 10%, which is extremely low – so we see a lot of scope here and are strongly engaged in that space. Accordingly, Acer's relationship business revenue break-up would comprise of K12 and higher education (6-8%) for colleges and universities, smart class school projects; SMB and corporate (9-18%); large infrastructure projects (sub-5%)– (that include department of posts with Infosys as system integrator, Aadhaar, port computerisation, highway toll booths computerisation); BFSI – 30%; government (22-24%) – (that includes National Informatics Centre (NIC), Director General for Supplies and Disposals (DGS&D) –( a central government agency, which on behalf of the government on a very macro level engages with vendors across verticals and drives rate contracts for PC business which is big, because many state governments can refer to the shortlisted rate contract by DGS&D, instead of going through regular purchase and negotiation process).

Government space also comprises e-governance that Acer handles in part for Kerala, Karnataka, Tamil Nadu, Maharashtra, Madhya Pradesh, Orissa and Rajasthan – including education of municipal schools, citizen delivery services, police and land records, etc. Election-manifesto projects also provide an additional 10% contribution to the government vertical for IT hardware purchases in Tamil Nadu, Rajasthan, Goa, MP, Assam, UP.

In this quarter (April-May) alone, Acer expects Rs 500 crore in revenues from its government business – contributing to 47% of its revenues in the enterprise space – as compared to the usual 38%. In unit terms, Acer is looking at sales of 50,000 PCs and 140,000 notebooks in this quarter.
Talking about other verticals apart from government, Rajendran says BFSI – which is another large area also holds a lot of scope. "We are the first to have launched the Windows 8, eight-inch tablet, and while it is a different ecosystem compared to an Apple or Android, courtesy Windows legacy, there is a lot of interest from public-sector banks which have started running pilots on it."

"Consumers are now looking more at convertibles or hybrids (tablet plus laptop), and we at Acer are focusing more on such devices to boost our consumer space, according to the changing needs of the consumer. We are not planning to enter the smartphone space in India, although we globally have smartphones in US, Latin America, Western Europe, Russia, China, Indonesia, Thailand, Vietnam, and Taiwan where our business model is linked to carrier engagements (with telcos) – which is quite strong," he says.

Finally, on plans for the year ahead, Rajendran says, "For 2014, our plans are to stay focused on the commercial segments and in the consumer space, engage with the new set of devices of tablets and convertibles – with fresh models that will be available from May-June."

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