Acer Buys Gateway for $710 Million

Taiwanese computer maker Acer has announced it is buying Gateway for about $710 million. This creates the world’s third largest PC manufacturer, and it gives Acer a bigger foothold in America than it has managed to create for itself. With about 10.5% of the US PC market, the merged firm will be less than half the size of Dell and HP, the number one and number two pc makers in the US.

Acer Chairman JT Wang said in a statement, “This acquisition of Gateway and its strong brand immediately completes Acer's global footprint by strengthening our US presence. This will be an excellent addition to Acer's already strong positions in Europe and Asia. Upon acquiring Gateway, we will further solidify our position as No. 3 PC vendor globally.” The Gateway brand, which is quite strong in the US, will be retained.

The focus now shifts to China’s Lenovo, which wants to buy Packard Bell BV. Packard Bell is about 18th in the world for PC makers, having shipped just over 1 million units last year. What it has, though, is a presence in Europe that Lenovo needs. What Acer has is the right of first refusal to buy Packard Bell, which it secured in 2006 as part of an agreement with Packard Bell owner John Hui. Industry analysts suggest that Acer might opt to buy Packard Bell just to deny it to Lenovo.

Even if Acer decides not to stop Lenovo’s acquisition, it could well drive up the price. If it can’t or won’t pay, “Lenovo will have to go back to what they were doing earlier, which is build their own distribution channels. It's taking away their easy entry into the European market,” said Jenny Lai, a Taiwan-based analyst with CLSA.

There is a geopolitical dimension to this, given that Taiwan and the People’s Republic of China despise one another. That could complicate matters in the coming months. Of course, it’s all good news to Mr. Hui, who will line his pockets twice since he not only owns Packard Bell but he is also a major shareholder at Gateway.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

Home