NEW YORK—Late in the afternoon on August 27 (Taipei time), Acer Inc. announced that it was acquiring the Irvine, Calif.-based Gateway Inc. for $710 million. With the acquisition, Taiwan-based Acer will become the third largest PC maker in the world, displacing Chinese computer manufacturer Lenovo Group Ltd.
The deal will create a $15 billion PC manufacturer with shipments of close to 20 million PCs per year. Industry analysts say that the deal makes sense for both Gateway and Acer, which have both lost share value and PC shipments recently in the hypercompetitive computer industry.
The acquistion marks a consolidation in the low-margin PC manufacturing industry, where most players have been falling by the wayside as heavyweights Hewlett-Packard (currently the world's top manufacturer) and Dell have slugged it out to make their brand the premium one with fierce price cuts and discounts.
With U.S. in Hand, Acer Looks at Europe
The deal pushes Acer, previously the No. 6 manufacturer in the USA, to number 3. With the acquisition, Acer is also in a strong position to exercise Gateway's right to acquire Packard Bell N.V., which has a strong foundation in Europe.
Chinese rival Lenovo has also expressed interest in acquiring Packard Bell, a move that analysts say expresses its interest in expanding to the European market. Lenovo's acquistion of IBM's PC division in 2005 gave it access to the lucrative U.S. market, a move that worried several US lawmakers and officials due to Lenovo's close ties and backing from the Chinese Communist regime.
Acer will pay around $1.90 per share for Gateway, a 57% premium over its Aug. 24 closing price.
Gateway's Fall From Grace
Acer's acquisition of Gateway marks the end for the 22-year-old company founded by Ted Waitt in an Iowa farmhouse. For years, the iconic company and its cow-print shipment boxes attracted consumers as well as Wall Street analysts.
Gateway saw its stock tumble 99 percent since 1999, due to the success of newer, lower cost computer makers such as Dell in the late 1990s and the burst of the technology bubble.
In the computer industry, "It's eat or be eaten," Christopher Wong, a fund manager at Aberdeen Asset Management in Singapore told Bloomberg News.
Acer has agreed to preserve the Acer, Gateway, and eMachines brands in a "multi-brand strategy," according to a press release.
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