Dell signs billion-dollar deal with Acer

Taiwan's Acer Group last week signed an original manufacturing product contract with Dell Computer to produce desktop and notebook computers, an Acer official confirmed.

Acer will produce about 1.3 million low-end computers for $US929 million, and expects to begin shipping the computers in the first quarter of next year, said Bruce Brough, a spokesman for Acer America Systems Group in San Jose.

A Dell spokeswoman at company headquarters in Texas, refused to confirm the agreement.

The deal is the second of its kind that Acer has signed recently with a major American computer vendor. Last month, Acer said it would buy $8 billion worth of hard drives, chips, networking and display technology from IBM for use in its server, desktop and notebook computers. Acer will also sell IBM products through its sales channels.

Acer and IBM also have a previously existing "multibillion" dollar agreement under which Acer manufactures PCs sold worldwide under the IBM brand.

Acer's low manufacturing costs allowed it to compete successfully against Taiwanese rivals such as Quanta Computer, Mitac International and GVC, Brough said.

"Acer is quite vertically integrated," he said. "It makes semiconductors and peripherals. In fact, it is one of the few companies that makes almost all the products it is selling."