Taiwan’s Acer posted 38 percent higher third-quarter profits on strong laptop sales but the results from the world’s No. 4 notebook maker still fell short of Wall Street’s expectations.

Acer’s profit climbed to T$1.97 billion ($44.94 million) from T$1.43 billion in the year-ago quarter. The company had been expected to earn T$2.37 billion, according to a survey of 12 analysts by Reuters.

Acer shares closed down T$4.70 to T$67 on the Taiwan Stock Exchange Market.

Revenue rose 47 percent to T$82.5 billion ($1.76 billion) from T$56.06 billion the year-ago quarter.

“Q3 was a very strong quarter in terms of PC growth worldwide and with falling prices of portables stimulating demand, we expect Q4 to show the same growth,” Acer president Gianfranco Lanci told journalists in Taipei.

The company also said its global notebook sales grew 88 percent, including a 250 percent increase in the United Stats and 137 percent growth in China. Acer said the sales boost helped it gain market share. The company hopes to lift its global market share to 5 percent from 4.7 percent by year’s end.

Mr. Lanci has said he expects Acer to overtake Lenovo, the No. 3 PC maker, by 2007 and Acer has actively started to court the United States and China markets (see Acer Eyes Dell With Notebooks).

Challenges Ahead

“They’re certainly on everyone’s radar screen because they’re doing the right things as far as marketing their products and utilizing channels,” said IDC analyst David Daoud. “They’ve taken an aggressive stance in Europe and the United States. But it still will take a lot of work for them to reach Lenovo’s level.”

In the third quarter, Lenovo had 7.7 percent of the global market and shipped 4.1 million units, compared to Acer’s 2.4 million units shipped. But Acer grew 54 percent year-over-year, while Lenovo’s growth was more like 13 percent, Mr. Daoud said. Mr. Daoud added it’s difficult to gauge Lenovo’s exact growth since Lenovo acquired IBM’s PC business during the second quarter of 2005.

Lenovo’s success could be due to its status as a mid-tier player. Other similar-sized companies have also seen impressive growth during the same period. Gateway grew 25 percent and Toshiba saw growth of 23 percent (see Gateway Revenue Up 11%).

“Everyone is apparently gaining momentum, largely due to the strong notebook market,” Mr. Daoud said.

To be sure, some worry about Acer’s profit growth. The company’s earnings were 17 percent below what analysts expected. Daniel Chang, an analyst at Marquarie Research, forecast Acer’s operating margin will fall to 2.4 percent in 2006 from 2.5 percent in 2005 because of aggressive pricing.

“Many people suggest that Acer isn’t making any money because they’re ‘buying’ market share,” Mr. Daoud added.

But Acer Chairman J.T. Wang was optimistic, saying he expects the company’s profits to hit T$7 billion by the end of the year. He also predicted Acer will earn T$10 billion in 2006.