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You are here: Home / Hardware / Acer Buys Gateway in $710M Deal
Acer Buys Gateway in $710 Million PC Deal
Acer Buys Gateway in $710 Million PC Deal
By Jennifer LeClaire / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Consolidation hit the PC market on Monday as Taiwan's Acer told the world it would acquire Gateway for $710 million. The merger will spawn the globe's third leading PC maker with $15 billion in revenues and shipments in excess of 20 million PCs per year.

Acer will pay $1.90 per Gateway share, a 57 percent premium over Gateway's last closing price. The acquisition has been unanimously approved by the boards of directors. If the deal closes as expected in December 2007, Acer's U.S. market share will effectively double in the fourth quarter.

Acer Chairman J.T. Wang called the Gateway acquisition a strategic transition and an important milestone in Acer history. "The acquisition of Gateway and its strong brand immediately completes Acer's global footprint, by strengthening our U.S. presence," he said in a statement. "This will be an excellent addition to Acer's already strong positions in Europe and Asia."

A New Market Leader?

According to IDC's second-quarter figures, Acer owned 5.2 percent of the U.S. market while Gateway secured 5.6 percent. With a combined 10.8 percent of the market, Acer would be a distant third behind Dell and Hewlett-Packard, which boast 28.4 percent and 23.6 percent, respectively, IDC reported.

"We did predict another round of more consolidation," said David Daoud, manager of Personal Computing and PC Tracker Programs at IDC. "Acer and Gateway have excellent opportunities to grow together as a combined company, at least in the U.S., because they don't overlap. Being acquired by a company that has resources and is committed to the U.S. market is probably the best thing for Gateway at the moment."

Acer officials said they expect the merger to result in significant revenue and cost synergies. The increase in scale will result in reductions in per-unit procurement and component costs for both companies. Company execs also said they anticipate savings by combining back-office functions.

"Joining with Acer will enable us to bring even more value to the consumer segments we serve and capitalize on Acer's highly regarded supply chain operations and global reach to expand the scope of the Gateway and eMachines brands around the world," Ed Coleman, CEO of Gateway, said in a statement. The merged company plans to differentiate its brands to address different consumer segments over time, with Gateway's strong recognition stateside complimenting Acer's strong recognition in Asia.

An Overdue Merger?

Roger Kay, principal analyst at Endpoint Technologies Associates, has long been a proponent of the Acer-Gateway merger. Kay called the merger a "clever consolidation" for both companies.

"There's going to be an issue as to how Acer and Gateway position their brands to stay out of each other's way, but the companies have indicated that they will maintain a multibrand strategy," Kay noted. "Positioning eMachine desktops and Acer laptops at the low end and Gateway as the premium in both form factors is a smart way to divide the brands."

Although Acer does offer Ferrari-branded laptops, Acer's notebooks have historically been viewed as price fighters. That's not likely to change, Kay said, because Gateway has better brand recognition on the high end in the United States. Collectively, Acer and Gateway offer more formidable competition to HP, known as the king of retail.

"I don't expect product development plans to be affected much for at least a year," Kay concluded. "What's in the pipeline is going to keep coming out. But the company will probably reposition the brands over the long-term."

Read more on: Acer, Gateway, Dell, HP, Lenovo
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