Multiple milestones as Acer buys Gateway

Multiple milestones as Acer buys Gateway

Summary: Acer announced Monday that it is buying Gateway for $710 million in a move that vaults the Taiwan-based PC vendor into the top 3 globally based on revenue. Acer reckons that Gateway will give it more than $15 billion in revenue and shipments topping 20 million PC units a year (official statement).

TOPICS: Hardware, Lenovo

Acer announced Monday that it is buying Gateway for $710 million in a move that vaults the Taiwan-based PC vendor into the top 3 globally based on revenue.

Acer reckons that Gateway will give it more than $15 billion in revenue and shipments topping 20 million PC units a year (official statement).

But the actual nuts and bolts of the deal take a back seat to some of the moving parts in the industry. Here's a look:

Acer becomes a bigger player. Acer was moving up the PC rankings anyway and the Gateway purchase just accelerates the move. What will be interesting to watch is how Acer manages multiple brands such as Acer, Gateway and eMachines. These days most of the PC manufacturing is farmed out anyway so it's really a brand game. Can Acer hit a home run with any of these brands?

In a statement: Acer president Gianfranco Lanci said:

"Both Acer's and Gateway's geographical presences and product positioning are highly complementary. We believe that our combined scale will lead to significant efficiencies. Gateway has built one of the industry's most powerful and unique brands and with this acquisition, we will have the opportunity to implement an effective multi-brand strategy and cover all the major market segments. In time, we intend to actively manage our brand portfolio and differentiate our brands to address different consumer segments."

Acer says adding Gateway will enable the company to cut component costs and bolster manufacturing efficiency.

The end of the Gateway standalone era. Just about a decade or so ago, Gateway was a top PC vendor. You'd mention Dell or HP and Gateway would be mentioned almost in the same breath. Then the dot-com crash came. Then direct sales became mundane. Then we got tired of cow spots. Then Gateway merged with eMachines and went through a few CEOs. Then we all forgot what Gateway really stood for. Apparently investors forgot too since Acer paid $1.90 a share for Gateway and that was a 57 percent premium. Gateway was wounded and this was the best exit for the company. Frankly, I'm shocked Gateway lasted this long as a standalone business. As for the cow spot debate--I err on the side of the cow spots are tired.

Lenovo follies. As part of the Acer deal Gateway declared that it would exercise a right to buy the parent of European PC maker Packard Bell. Why is that a big deal? It foils Lenovo's encroachment in Europe. Lenovo was trying to buy Packard Bell.

But that's just a small part of the Lenovo angle. By becoming the No. 3 PC vendor, doubling its U.S. exposure and thwarting Lenovo's Europe plans Acer has dealt China's flagship computer manufacturer a big blow. And all of this drama comes as Lenovo has been struggling on the global stage. Remember Lenovo was going to be a big player once it bought IBM's PC business. Instead, Lenovo has been so-so. Lenovo's financials have improved and it still has some corporate heft, but the argument that it's a huge brand outside of China is a stretch. Lenovo also faces a price war on its own turf from Dell.

Lenovo will be the fourth largest PC vendor behind Acer, according to IDC. A merged Acer and Gateway would have sold about 18.6 million PCs worldwide in 2006, or about 8 percent of global sales, compared to Dell's 39.1 million units, HP's 38.8 million and Lenovo's 16.6 million.

Topics: Hardware, Lenovo

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  • The "Third-party OS" PC business is just a numbers game

    "Can Acer hit a home run with any of these brands?"

    I'm surprised by such a question!. At ZDNet, what is a home run? Acer has been hitting them over and over again, that's why they are in the top 5. But it takes more than home runs to be in first place. Acer is a winning company that understands the business of a making and selling a machine that is useless without the product of another completely independent business far out of it's control.

    "These days most of the PC manufacturing is farmed out anyway so it?s really a brand game."

    The kitchen appliance business has been this way for years. Whirlpool, KitchenAid and Maytag are all made by the same company sometimes in the same factory. This model has been adapted to the PC commodity industry.

    Not a word about what this will do to the price of PC's? You guys don't ever do an article about Apple without talking about price. With Acer controlling a larger part of the market, what will that do to their margins? Will they become more profitable? Will they put pressure on the industry to lower prices or will prices of those big, bulky, infinitely-expandable-but-rarely-done boxes actually go up in price with less competition in the market?

    Seems like a good move, though and hope nobody loses their job as a result.
    • Less competition?

      That "...those big, bulky, infinitely-expandable-but-rarely-done boxes..." comment sounds like something a Mac user would say. Your post, however, actually made sense, which is somewhat refreshing. I think that competition will actually improve, since Gateway had shrunk down to less than 5% market share (even smaller than Apple! Sorry, I couldn't resist.), and was no longer a player in the market. Combined with Acer, they are now in a position to compete with HP and Dell, which is a good thing. Three players at the big table is better than two.
  • Bulks up the band on the Titanic; no change at Bloatfarm

    This does nothing except bulk up the midgets who play the MS song; it does nothing to change Bloatfarm Titanic.

    The Bloatfarm will continue as before.
    Jeremy W
    • Did your silly rant have a point?

      Or ANYTHING of value?
      • Jeremy W


        Nah, he's like the OleFool. He likes to see his handle on the screen since it bolsters his self-importance.

        He is all sound and fury, and nothing of substance.
        M.R. Kennedy
        • The point is...

          ... that nothing that the midgets does has any real effect on the Bloatfarm except that the Bloat will now be more efficiently distributed.

          Imagine that the sewage processing facilities in your county all merged and now push the sewage back to your home.

          This is the effect.

          It is simply a more efficient sewage bloat distribution system for the vicious, evil Bloatfarm: more rapid and effective bloat distribution.
          Jeremy W
        • Jeremy...Nah.. He's more like...

          [b]Nah, he's like the OleFool. He likes to see his handle on the screen since it bolsters his self-importance.[/b]

          ...Linux Geek with Mightgetto thrown in for good measure. While it's true they both are vehemently ABM, this one just babbles his anti MS rants incoherently in no particular direction.
    • As in Bloatfarm, I'm assuming you're talking about

      you posts? Nothing of any value there, unless your into trolling.

      At least you are good for a minor laugh, so you're not [i]totally useless{/I}

      John Zern
  • GO! ACER.. . option,option,option: video cards for everyone. Nice look!

    A lot of problems in todays PC market with DirectX10 ; bringing in an ATX that carries laptop GPU options that will work will 9c is cool. Good luck with your current distributor outlets saling Gateway Products.

    _(35w) processor guy.
  • Hope they make better stuff than gateway did.

    Since 2000, all the gateway products we've happened to buy were of poor quality, with multiple failures. As a former gateway user, I'm glad this is happening. Hopefully Acer can get them on the right track and make stuff that actually works.
    • That's not asking for much.

      Gateway was crap long before 2000. They were always about marketing, never about support or quality. Acer, on the other hand, has produced some quality products at a reasonable price. I do, wonder, though, if they will maintain any manufacturing in this country.
    • The best quality prison and child labor can provide

      Go Acer.
    • Wanna try that again..?

      [b]Since 2000, all the gateway products we've happened to buy were of poor quality, with multiple failures. As a former gateway user, I'm glad this is happening. Hopefully Acer can get them on the right track and make stuff that actually works. [/b]

      Gee.. My 2002 vintage Gateway LCD monitor seems to be working decently. My Gateway laptop - a 7510GX - works very nicely. I'd still have it except that I needed the money. Life sucks when you're between projects.

      Contrary to your opinion, Gateway has been making decent products over the last 7 years. Companies don't last very long if their products are even remotely HALF as bad as you make them out to be. In other words - they MUST have been doing something RIGHT or their doors would have been shuttered long ago.
  • Hail Commodity PCs

    Gateway goes the way of Chow Mein Kampf and members of the PC Liberation Army
    reign supreme.
  • Domestic opening?

    Could this open the door for an unknown domestic PC builder to emerge?
  • Acer buys Gateway

    One of my first computers was an Acer. I loved it, because it was a
    workhorse and, more importantly, the customer support/service was great.
    For some reason, that stopped. So, my next computer was a Gateway, with
    which I became enthralled, because it also was a workhorse and the
    customer service/support was outstanding. I bought several. But, once
    again, they failed me their customer services/support began dropping the
    ball, until it became mostly just talk and no help at all; in fact, it became
    mostly non-existent. I swore never to buy another Gateway, not only
    because their workmanship and their product got very shoddy. But, the
    important factor for me was their service/support was nil. I will not
    tolerate bad customer support/service.

    I own a MAC now. I'm replacing all my machines with Apple products.
    There simply is no question any more, in my book.

    My money will always follow good customer service and support. When will
    these companies learn that a first rate product demands first rate support.
    That's what makes the difference.
  • buyout chain reaction? (question)

    Acer buys Gateway. How does this give Gateway the right to buy Packard Bell? How is there a Gateway to buy PB after Gateway has been consumed? Finally, why would anyone want to buy PB? They were laughed out of the U.S. Maybe for the EurAsian market footprint? For a company (Gateway), if not a brand that has ceased to exist? Does this mean Acer would own PB, or is there some byzantine and arcane corporate law or structuring at work here? [You must now answer all these questions in 15 minutes or you fail the test. Pick up your pencils now...]
    • Funny thing about that...

      Packard Bell, at least the Euro-verion of the company, seems to have been making decent hardware in Europe. They're nothing like the American version often refered to by pet names such as Pukeard Hell and such. So if they make decent enough hardware then why the heck NOT buy one?

      Gateway was bought. Not eaten.

      It's entirely possible that Gateway was in talks with PB to buy them out before they got bought out. The article doesn't quite mention anything about that.
  • I'm reading this on my Acer...

    ... and I don't know whether to be happy or despondent. As above, I have loved Acer for years; knowing them to be the R&D for Leading Edge in the '80's.
    My apprehension stems from the association with Gateway. In the late '90's, I began working for a firm which began buying up Gateways as they phased out Toshiba's and other makes. The Toshiba's were much better machines, but too small for the growing demands of graphics publications programs; but the Gateways were posing insurmountable problems, ... exponentially.

    In 2001, I caved and purchased a clearance HP with ME. It was OK, but a while later I chanced to purchase a Sony e-machine, and it was/is one of the best machines I have ever had the pleasure of using - at home or work. When the Sony-Gateway acquisition came about, I was slightly saddened because of the history of Gateway failures. When I bought a new e-machine, it was crap; I returned it and tried a newer, upgraded model, only to discover that it was worst than the previous.

    Based on that, I'm not altogether hopeful that Acer has not destroyed its product and its reputation with this move. Time will tell. Unfortunately, unless they, as Dell, begin moving product with XP, I will not know for years - perhaps forever - since I cannot justify anything with the problems now associated with Vi$ta; and - most certainly - cannot pose a series of tests to prove their quality when up against such a failure of an OS.

    I'm quite disappointed, but had decided against buying a new Acer anyway, ... unless I could have one with XP SP2. Either way, I guess I'll be looking around for used Acers for a while, so I feel distanced from the "new kid on the block". Just hope that, in the long run, Acer can improve a beated and bloody history of Gateway/e-machine. Just fear the other two can drag Acer down to the depths of degradation.

  • I miss the Gateway costume ads from the 80's

    Remember when they'd have a bunch of employees in some costumes for the multi page ads in the magazines? Western theme one month, Robin Hood and crew another time.