A salute to all the great folks from South Dakota who made this happen; let me just say this, Ted Waitt and his Team did far more, with far less than all the other PC mavens. He remains the smartest entreprenuer I've ever met. And I've met a lot of really good ones.
Wish he'd join the SIP network now that he's free!
(how do you spell invitation)
Taiwan's Acer to buy Gateway for $710 million
By Rex Crum & Angela Moore, MarketWatch
Last Update: 4:02 PM ET 8/27/07
SAN FRANCISCO (MarketWatch) -- Gateway Inc., once one of the highest fliers of the personal-computer industry but in recent years reduced to a niche player, said Monday it would be acquired by Taiwanese PC giant Acer Inc. for $710 million.
Under terms of the deal, Acer will pay $1.90 for each share of Irvine, Calif.-based Gateway (GTW) , the one-time Wall Street star that's struggled mightily since the end of a high-tech boom in 2001.
Following the deal's announcement, Gateway's shares soared 60 cents, or nearly 50%, to close at $1.81.
Although the purchase price represents a 57% premium, it's far below Gateway's all-time high of $84 set in November 1999.
It was not immediately known how Acer plans to integrate Gateway into its operations or if the Gateway brand will continue to be used in the U.S., where Gateway is the fourth-largest PC company and is still widely recognized in the consumer and retail markets.
In a statement, Chief Executive Ed Coleman said that joining with Acer would enable Gateway "to bring even more value to the consumer segments we serve."
However, despite remaining one of the top sellers of PCs in the U.S., Gateway's sales have declined dramatically compared to the overall market and the performance of its competitors.
According to technology research firm IDC, Gateway's second-quarter PC sales in the U.S. fell 7% from a year ago. IDC said Acer was the No. 6 PC company in the U.S. during the second quarter of this year, but that its U.S. sales rose almost 164% from last-year's second quarter. Adding in Gateway's sales figures would lift Acer to the No. 3 spot.
The acquisition would give Acer a stronger presence in North America, particularly in the lower end of the market. Both Gateway and Acer sell value-priced desktops and laptops, and they rely extensively on resellers and Internet sales.
The deal also strengthens Acer's position in the U.S. against Hewlett-Packard Co. (HPQ) , Dell Inc. (DELL) and Apple Inc. (AAPL) , its larger market rivals.
However, BMO Capital Markets analyst Keith Bachman said that while Acer's acquisition appears to give in a better market position on paper, the company will have its hands full integrating and distinguishing the brands of Acer, Gateway and low-cost PC maker eMachines, which Gateway owns.
"Gateway as a company and a brand has struggled to resonate with consumers," Bachman said, adding that in the retail market, "all three Acer [and] Gateway brands were chasing similar consumers," and that Acer will need to develop a clear product-segmentation strategy.
Acer has been believed to be in the market for a U.S. acquisition for a long time. J.T. Wang, the company's chairman, said in a statement that the acquisition "completes Acer's global footprint, by strengthening our U.S. presence."
The acquisition, which received the backing of both Gateway and Acer's boards, is expected to close by December, the companies said.
Leapfrog effect
Upon acquiring Gateway, Acer will vault above Lenovo Group to become the No. 3 PC vendor globally. The combined company would generate $15 billion in annual revenue and account for more than 20 million PC shipments each year.
The two companies expect to generate savings of up to $150 million from eliminating duplicate operations and from wielding greater purchasing power. By negotiating larger component purchases, Acer should be able to secure lower prices.
The deal signals the end of a run for Gateway that spanned much of the PC era in which the company followed the classic example of a one-man start-up and became an industry icon -- only to falter during an economic downturn and never fully regain its business momentum.
Founded in 1985 by Ted Waitt in an Iowa farmhouse, Gateway became quickly known for three things: Waitt's ponytail, the company's distinctive cow-spotted boxes and being based in South Dakota, as opposed to a computing hotbed such as California's Silicon Valley. Gateway moved its headquarters near San Diego in 1998 and then to Irvine, Calif., in 2004 |
