Acer moves to No. 3 with Gateway buy

This article was written by Liu King-pong and published by the Taiwan Journal on September 6, 2007. It reports that Acer Inc., the world's fourth-largest personal-computer maker, recently announced its plans to acquire U.S.-based Gateway Inc. for US$710 million. The acquisition will allow Acer to overtake China's Lenovo Group Ltd. as the world's third-largest PC vendor.

Gateway was founded in 1985 and took over rival eMachines Inc. in 2004. It currently has over 1,600 employees. The takeover of Gateway will double Acer's current 5.2-percent market share in the United States. It will also give Acer an option to buy Packard Bell in Europe.

According to this article, Gateway acquired the right of first refusal in an arrangement it signed with Packard Bell in 2006. The deal allows the sale of Packard Bell to a third party only if Gateway has first declined to buy it. Such an arrangement can preclude Lenovo Group's bid to acquire Packard Bell.

According to this article, with the synergy among Acer, Gateway and Packard Bell, Acer expects to save at least US$150 million a year in procurement of key components alone. More significantly, the merger will bring the number of PC brands in Acer to three -- Gateway, Packard Bell and eMachines. Since Acer is renowned for its operating strategy of “one company, one brand name and one global team”, it will probably take the company at least six months to come up with a strategy to absorb the new additions. Indeed, Acer's main challenge lies in integrating the different cultures and managerial approaches into one.

Still, according to Acer, the strategic acquisition is an important milestone in the company's long history. The merger will be an excellent addition to Acer's already strong position in Europe and Asia. Specifically, the combined sales of Acer and Gateway is expected to top US$15 billion a year from shipments of more than 20 million PCs. With a strong presence in the United States, Acer will be a true global player.

According to this article, although Acer is currently trailing Lenovo in the Greater China and North American regions, the acquisition of Gateway is expected to provide a new opportunity for the Taiwanese company to grab a larger piece of the fast-growing North American market. Acer and Gateway are compatible in many aspects, including product identity and market acquisitions. In addition, Acer will acquire Gateway's teams of world-class skilled employees. The three brands of Gateway, Packard Bell and eMachines will enable Acer to target different market segments in different geographical regions.

According to Gateway, the deal will enable the company to bring even more value to the consumer segments it serves. Gateway can also capitalize on Acer's highly regarded supply-chain operations and global reach.