Traders punish Acer for Gateway purchase
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(InfoWorld) - Shares of Acer Inc. opened down by their daily limit on the Taiwan Stock Exchange early Tuesday, as investors took a dim view of its decision to buy U.S. PC vendor Gateway Inc. Acer stock opened down 6.9 percent at NT$59.2 (US$1.79), the lower limit imposed by trading rules on the local stock exchange, and wallowed around that level for much of the early trading day. "People think Acer paid too much for Gateway," said Andrew Teng, sales manager at Taiwan International Securities Corp. in Taipei. According to a rumor in the market, Acer and rival Lenovo Group Ltd. fought a bidding war for Gateway, upping the price, he added. Lenovo declined to immediately comment. Stock and industry analysts offered negative views of the deal, and some feared Acer could run into the same problem with the merger as Taiwan's BenQ Corp. did with its acquisition of Siemens AG's mobile phone division,Â a business that ultimately filed for bankruptcy protectionÂ in Germany. The Siemens deal proved to be too costly for BenQ, which couldn't turn the business around. The company, formerly part of the Acer Group, said it spent over US$1 billion trying to make the purchase work. There are only a few parallels with the Acer-Gateway deal, mainly that Gateway is viewed as a business in decline. "We are negative on this acquisition," wrote Daniel Chang, PC industry analyst at Macquarie Research Equities in Taipei. "Acer's brand has begun to attract U.S. consumers so we believe it would have been much cheaper to build U.S. market share on its own than to pay such a high premium for a declining market share PC company." The company's U.S. market share dropped to 5.6 percent in the second quarter, down from 6.5 percent at the same time last year, according to industry researcher IDC. Acer paid a 57 percent premium over Gateway's closing share price of US$1.21 last Friday, which was too high, Chang said. Acer agreed to buy Gateway in an all-cash deal for US$1.90 per share, or around US$710 million. News of the deal sent Gateway shares up 50.4 percent, to US$1.82 per share, on the New York Stock Exchange on Monday. Acer said the deal will transform it into a much larger company with US$15 billion per year in revenue and shipments of nearly 20 millionÂ PCs and give it a solid base in the important U.S. market. The company plans to market multiple PC brands worldwide after the transaction, thereby increasing sales. The deal will also help it cut costs. Size is vital to gaining volume discounts from parts suppliers, the company said. Analysts weren't convinced. Chang cautioned that Gateway's market share was on the decline anyway, and that if Gateway buys Packard Bell BV, which it has pledged to do, the deal will add another company to Acer's stable that it doesn't need. Packard Bell is strong in Europe, where Acer already holds significant market share. Jack Gold, from industry researcher J. Gold Associates, said the Acer-Gateway combination brings little synergy to the market other than size. "Both Gateway and Acer are primarily consumer brands, with little presence in the enterprise [market] -- where margins are higher, and where higher-end laptops, an increasingly important share of the PC market, are sold," he said in an e-mail. Investment banking firm Goldman Sachs listed several positives for the deal in a report, but offered up a generally negative view overall. In particular, the possible acquisition of two companies at once, Gateway and Packard Bell, could slow the process of bringing each company into the Acer fold. "We think Acer may still experience the pain of consolidation of three different companies for a certain period of time," wrote Henry King, director of Asia-Pacific investment research at Goldman Sachs (Asia) LLC, in a report on Tuesday. Goldman Sachs acted as an advisor for Gateway in the deal with Acer. Â
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Acer has passed Lenovo as the world's third largest PC vendor with its purchase of Gateway, and now it's gunning for U.S. giant Dell.
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Blog: The No. 2 PC seller will offer a $899 desktop, a $599 desktop and a $599 laptop with Ubuntu Linux preinstalled.
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By The Associated Press  IRVINE, Calif. - Gateway Inc., the third-largest personal- computer company in the United States, said Friday it rejected an unsolicited $450 million bid for its retail business from eMachines Inc. founder Lap Shun Hui.  Gateway said the Aug.
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(InfoWorld) - Taiwanese PC vendor Acer Inc. has started selling laptop PCs at popular retailer Best Buy Co. Inc., expanding its presence in the U.S. market. Best Buy is featuring Acer laptop PCs with a brand spotlight notice on its Web site. All five of the Acer laptop PCs on offer at Best Buy are priced under US$900. The most expensive of the five is the Acer Aspire AS5610-4537, which runs on an Intel Corp. Core Duo processor. It costs $849.99. The lowest-priced Acer laptop at Best Buy is the Aspire 420 notebook, AS3680-2022, which runs on an Intel Celeron M and retails for $499.99. According to the Web site, the notebook is already sold out. A similar Aspire 420, the AS3690-2710, runs for $699.99 with a larger, 15.4-inch screen. Acer has targeted the U.S. and China as two major potential growth markets for the company, and has invested more resources into the two countries over the past few years. Acer is the world's fourth largest PC vendor by revenue and the fastest growing PC vendor in the world among the top 10.
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(InfoWorld) - Acer Inc. executed a master stroke in the global war for PC market share withÂ its US$710 million purchase of Gateway Inc., but it may take a while for the market to see the light. Industry researchers view the deal as a long term positive, saying it not only strengthens Acer's ability to challenge Hewlett-Packard Co. and Dell Inc. for U.S. market share, but that it alsoÂ blocked a potent rival, Lenovo Group Ltd., from gaining ground in Europe. Even Sun-tzu, the ancient Chinese war strategist who wrote "The Art of War," could not have achieved a better move, wrote J.P. Gownder, consumer PC analyst at Forrester Research, in a report. "Acer strategists calculated several moves ahead in the global PC chess game. If the execution is solid, this deal will create a powerful third-place PC competitor that will challenge HP and Dell by 2009, and portends the rise of non-Japanese Asian PC superpowers," he wrote. But in the near term, stock market analysts and investors couldn't have disagreed more. Almost in unison, they criticized the deal as too expensive, too complex and unnecessary for Acer's growth. "The premium paid to Gateway may be too high, and the execution risk of a multiple-brand strategy is clearly the key here," said Vincent Chen, PC industry analyst at CLSA Asia-Pacific Markets in Taipei. The negative comments hurt Acer's stock. The shares fell 10.6 percent this week to end at NT$57.9 (US$1.75) Friday on the Taiwan Stock Exchange. But the view of the financial sector may be short sighted. Analysts at industry researchers such as Forrester, IDC and Current Analysis West take a longer-term perspective on the deal. Acer and Gateway may lose some market share immediately following the merger, which is normal, according to Richard Shim, an analyst at IDC. But over the long term the deal will give it the size and clout to gain market share and source components. "The opportunity for Acer in acquiring Gateway is the consumer market segment and particularly the retail channel," he wrote in a report. "The acquisition of Gateway will not necessarily position Acer to be a competitor on the level of Dell and HP but it lays the ground work for Acer to be a more significant player in the largest market in the world [the U.S.] and in the fastest growing segment of that market." Current Analysis West analyst Toni Duboise believes Acer could triple its U.S. market share with the addition of Gateway-branded desktops and notebooks, and eMachines' value PCs. The impact of the deal will take months, even years to ripple through the market, analysts say. Not only did Acer add significantly to its size,Â it also stopped Lenovo from increasing its presence in Europe. Lenovo had been in talks to buy Packard Bell BV, but by picking up Gateway, Acer was able to block the deal. Gateway held the right to refuse any deal to buy Packard Bell and make its own offer due to an older contract between the two companies. Stock market analysts argue that buying Packard Bell is a waste of time for Acer because the company is already strong in Europe. But industry researchers, and Forrester in particular, argue the move staved off a Lenovo ploy that might have hurt Acer in Europe. To be sure, merging companies isn't easy. Acer's ability to join company cultures, keep valuable workers and create product strategies that make sense will be the key to the success of the deal. The company has many recent examples to learn from, most notably HP's purchase of Compaq and the sale of IBM Corp.'s PC division to Lenovo. Rob Enderle, industry analyst at the Enderle Group, warns that Acer needs to make sure it keeps people from Gateway with experience in acquisitions, such as those who worked to make eMachines a part of Gateway after that deal. "This is also an ideal time to take a look at all of the technology both companies are using, both HP and Lenovo waited until late to get rid of a lot of the out-of-date operational technology the companies were using and that hurt both a lot. Particularly in the case of HP and the PC Company side of Lenovo, updating the core operations technology was critical to the success both firms are experiencing now," Enderle said. Time will tell if Acer can execute its merger strategy as well as its battle plan for the global PC market. Â
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Computer maker Gateway Inc. on Tuesday said it agreed to buy back about $316 million of its stock from Internet provider America Online Inc.
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(InfoWorld) - Gateway has rejected an offer to sell its retail arm to the California man who founded the company's eMachines line. Lap Shun "John" Hui surprised Gateway's board in August when heÂ offered to buy their retail operationsÂ for a reported $450 million. Gateway issued a statement Friday saying it had decided that the offer was not in the best interest of its shareholders. In 2004, Gateway paid Hui $234 million to acquire his company eMachines, a line of entry-level PCs. Hui used the money to start an office supplies company, and still owns about 5 percent of Gateway's stock. Hui's offer would have stripped Gateway of its agreements with third-party resellers like Best Buy Co., Circuit City Stores, and Wal-Mart Stores. The company sells the rest of its computers through direct sales channels on the telephone and Internet, and through its professional business channel. Gateway, of Irvine, California, is the third-largest PC vendor in the U.S. but has posted financial losses for several quarters. Still, analysts said that breaking the company up would not have made it more competitive.
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Acer's deal to acquire Gateway for $710 million has derailed Lenovo's plans to acquire Packard Bell.
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Restrictive hardware and convoluted rights management crimp consumer choices.
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Whoopee cushions all round, 'cept in Germany Computacenter said it has been hit by a "disappointing" trading performance for the first half (H1) of 2007.â¦
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Acer's acquisition of Gateway will result in a different product mix starting with some new Gateway laptops to be released early next year, an Acer executive says.
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TAIPEI, Taiwan - Taiwan personal computer vendor Acer Inc. expects its computer shipments to increase 30-40 percent this year, a reduction from previous sales forecasts.
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In an interview published today, Acer Chairman and CEO J.T. Wang vowed to step down if his company's plans to buy Gateway for $710 million fail.
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(InfoWorld) - Acer Inc.'s agreement to acquire Gateway Inc. has foiled Lenovo Group Ltd.'s plans to buy PC vendor Packard Bell BV, and could leave Acer owning both Gateway and Packard Bell. On August 7, Lenovo revealed it was in discussions with Packard Bell over a possible acquisition. At the time,Â it looked like Lenovo had beaten Acer, which was also interested in acquiring the company. However,Â Acer's plan to buy Gateway for $710 million, announced Monday, trumps anything Lenovo brings to the table in its negotiations with Packard Bell. In 2006, Gateway signed an agreement with John Hui, Packard Bell's largest shareholder, that gives Gateway the right of first refusal if he decides to sells PB Holding Co. SARL, the parent company of Packard Bell. What that means is that if Packard Bell wants to enter into a final agreement to be purchased, the company has to ask Gateway first, said Y.T. Du, of Citigroup Global Markets Inc., which represented Acer in the negotiations. Gateway can refuse the deal if it wants and enter into purchase talks with Packard Bell, he said. That is exactly what Gateway has done, announcing plans to exercise its right of first refusal at the same time the Acer deal was unveiled. The agreement between Hui and Gateway is rooted inÂ Gateway's 2004 acquisition of eMachines, a PC vendor that Hui founded. When Hui acquired his stake in PB Holding Co., he granted the right of first refusal to Gateway in exchange for the company waving parts of the noncompete agreement that Hui signed when eMachines was sold. Now that Gateway has entered into talks to acquire PB Holding from Hui, Acer could end up owning both Gateway and Packard Bell. While a Packard Bell acquisition would increase Acer's market share in Europe, a deal also means Acer will face having to integrate two companies with its existing operations instead of only one. "Acer is still really strong in Europe," said Bryan Ma, director of personal systems research at IDC Asia-Pacific. Ma worried that Acer's desire to acquire Packard Bell is driven more by a desire to slow Lenovo's growth in Europe, rather than a pressing need to strengthen its own position there. A Lenovo spokeswoman was not immediately available to comment. Â  With additional reporting by Dan Nystedt in Taipei. Â
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Dell decided against bidding for Gateway, but may buy its way into other markets, CEO says.