Someone's making massive margins in this business

DESPITE MAKING MAJOR advances over the past five years, Acer chief Gianfranco Lanci can't help but feel miffed about the size of the margins PC makers have to survive on.

The PC industry is "totally different" to any other industry, he told Acer's annual global press conference here in Madrid. The three to four per cent margin that is deemed ok for PC makers is far below that of any other industry, he says. And it obviously gets his goat.

Fierce competition is one of the reasons for this, of course, but there are others. And Lanci has to restrain himself from launching into another stinging attack on Microsoft following the trouble he got himself into by calling Vista a lame duck earlier this year.

Acer expects the industry to consolidate further and only a limited number of players will remain, Lanci says. Acer is likely to be one of those as it operates well within the tight margins Lanci despises and business is booming for this Taiwanese giant now run by a tough team of Italians.

Like most Taiwanese companies, Acer is focused on being "number one". And it's getting there. It squeezed itself in to number four slot last year and has spent these past nine months telling everyone about it. Now, on the back of the acquisitions Gateway and Packard Bell it will now have probably have squeezed out Lenovo to occupy third position on the worldwide grid, behind HP and Dell.

Lanci said that he expects Acer to bring in revenues of $13.5 to $14 billion this year and expects to be able to do $20 billions' worth or so of business in 2008.

But the only way Acer can get better margins to cut costs, which he believes Acer can also do - to a certain extent - but he'd really like to make the sort of margins some "component manufacturers" and software companies make.

"A few people are making a lot of money and the rest of us 3-4 per cent," he moaned, "but I think this is about to change," he said before reigning himself in.

We urged him to continue the train of thought and wondered how he might be able to put the squeeze on the likes of fat-margined Intel. "We don't want to squeeze anybody, I'm not getting into that," he protested. And an eerie silence descended about the cavernous hall here in the damp outskirts of a rainy Madrid. µ