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Acer Says It's Not Making Any Money From $799 Ultrabook

When the Ultrabook concept was first unveiled, the sweet spot for pricing was supposed to be 'under $1000.' In the months that have passed since, manufacturers have said they are hoping to make these super sexy and slim machines even cheaper. And when we say cheaper, we mean half of that original goal price. Right now, prices are sitting at around $1000 or just over, depending on the manufacturer, but PC manufacturers are hoping to get the price down to $499 or $599 in the next year. At CeBit this week, Acer reiterated its intention to get the price of Ultrabooks down to $499. However, the company also revealed something interesting about its current $799 Ultrabook: It's not profitable.

Right now, the company is selling its Aspire S3 for $799/€699 but, according to Acer's Christoph Pohlmann, this isn't a profitable price. The Verge cites Pohlmann as saying Acer is basically just breaking even as far as its entry-level Ultrabook is concerned and the whole venture is only made worthwhile by the money brought in by the higher-spec'd SKUs.

"Christoph told us that the S3 is at present priced on what is essentially a promotional basis — aiming to attract more converts to the hardware platform and the idea of truly ultraportable computing — which is unlikely to last over the long term," writes Vlad Savov. "The current costs of sourcing the necessary components and then manufacturing ultrabooks, said Cristoph, are prohibitive for any price point approaching €499, never mind $499. He does leave open the possibility that efficiencies in production and cheaper components could drag the price down, but he was generally dubious on the idea of a sub-$500 ultrabook."

It's not at all unusual for companies to choose to take a loss on a product just for the sake of pricing their product competitively. A recent example of this is Amazon's Kindle Fire, which is priced at $199 but costs more to manufacture. However, in Amazon's case, the company will make that money back on content sold for the tablet. For Acer to sell its Ultrabooks at a loss is more of a risk than, for example, selling a games console at a loss (where, again, money can be made elsewhere -- games and royalties) and it's likely Acer won't make that money back all too quickly. It'll be interesting to see how fast Acer can take the Ultrabook price down to $499. The company has said on more than one occasion that it hopes to do so by 2013. But will it be possible? It's likely the cost of production of Ultrabooks will fall somewhat, but it's unlikely it will fall by that much. It sounds like Acer will have to subsidize each unit by a considerable amount if it wants to make good on its promise of $500 Ultrabooks by next year.

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  • atikkur
    cheaper price is always welcomed..
    Reply
  • the_krasno
    It's a risky move but they can get a bigger base in the market which can pay off in the long run.
    Reply
  • heman8400
    I've always been under the impression that a "race to the bottom" in any industry, reduces profits. Apple's made a business model (for their computers) on premium parts + higher price = more profits. If they aren't making money at $800, why is the answer "lets lower the price?"
    Reply
  • nforce4max
    Reduce the size of the board and then they can make room for a larger cooler which will allow for a higher tdp cpu for more speed.
    Reply
  • bloc97
    A recent example of this is Amazon's Kindle Fire, which is priced at $199 but costs more to manufacture. For Acer to sell its Ultrabooks at a loss is more of a risk than selling a games console at a loss. It'll be interesting to see how fast Acer can take the Ultrabook price down to $499.

    WHAT? I can't believe that a single Ultrabook can take more than 499$ to manufacture... :fou:
    I always thought that those things were manufactured in groups and cost only 200$ for 10 ultrabooks.
    Reply
  • bloc97
    nforce4maxReduce the size of the board and then they can make room for a larger cooler which will allow for a higher tdp cpu for more speed.
    Lol an Ultra(large)book... :D
    Reply
  • masterasia
    I would buy an Ultrabook for $500. Let's hope battery life improves too. So far it looks like the HP Folio has the best battery life.
    Reply
  • mikenygmail
    It's not true that Acer is not making money on an $800 thin laptop.
    They don't even cost $500 to make, let alone $600 or $700.
    Unless this supposed $800 price includes a gigantic TV ad campaign, it's nonsense.
    Reply
  • bloc97
    heman8400I've always been under the impression that a "race to the bottom" in any industry, reduces profits. Apple's made a business model (for their computers) on premium parts + higher price = more profits. If they aren't making money at $800, why is the answer "lets lower the price?"
    Because their product is already in-shelf and they can't afford paying an revision (taking back all products and improving them), so the best they can hope is to lower the price... (at least they don't loose 100% of the price that took to make products)
    Reply
  • lpedraja2002
    bloc97WHAT? I can't believe that a single Ultrabook can take more than 499$ to manufacture... I always thought that those things were manufactured in groups and cost only 200$ for 10 ultrabooks.
    My thoughts exactly, these Ultrabook are underclocked laptops with a Solid State Drive and a lot slimmer too, so how could they not make any money out of them? Must be the Solid State Drives prices which were affected by the Thailand floods.
    Reply