Gateway Finds its Way

By Scott Ferguson  |  Posted 2007-08-28 Print this article Print

Back to Relevance, Thanks to Acer"> The best model that Acer can follow is the way Hewlett-Packard followed up on its deal for Compaq, according to analysts. After a struggle in the beginning, HP has managed to firmly embed Compaq within the company, which is one of the reasons the company has successfully outmaneuvered Dell in the last few quarters. Click here to read more the rising influence of the Chinese Yuan.
For Acer, the deal gives the company a chance to build around two well-known but faltering brand names—Gateway and eMachines. In its report, TBR notes that Acer has lacked a solid desktop offering, which it now has with Gateway. Acer also now has access to Gateways FX line of high-end desktops for enthusiasts and gamers.
This will also give the company a chance to compete in the desktop space against HP, Dell and Lenovo. While Acer will have additional brands to sell and market, the company does not seem likely to change it branding strategy with the addition of Gateway, according to TBR. However, the move does mean that Acer will now have access to additional shelf space in retail stores, such as Best Buy, plus access to Gateways distribution network and parts suppliers. "It gives Acer a lot more shelf space and another brand to play with that has some decent recognition in the U.S.," said Stephen Baker, an analyst with the NDP Group, adding that the purchase doesnt mean Gateways problems will disappear; the company has been losing market share with it own line of desktops as well as with its eMachine products. "I think Acer is going to keep the Gateway products in the midrange position and in the entry level, while it tries to scale up with its own brand to hit that part of the market," Baker said. "I dont know how long the eMachine products will be around. Its pretty hard to manage three different brands." The one drawback to consolidating some of the brands, Baker said, is that while it may jettison some unpopular or unprofitable products, it also creates more shelf space in retail outlets that companies like Dell and Toshiba would be eager to fill with new PCs. While most of the talk concerning the Acer deal has centered on the consumer market, the enterprise side of Gateway is up for grabs. Acer said it is in discussions to sell the professional division of Gateway to an unnamed "third party," but how or when this will happen in unclear. It does seem clear, however, that the other major OEMs are unlikely to buy the division. "Acer does not expect to operate Gateways Professional segment, which sells PCs and servers to government, education and healthcare customers; Gateway intends to sell the business separately," according to the TBR analysis. "TBR believes it is likely to be sold to a lesser-known PC manufacturer or to a private equity company." While the purchase of Gateway means that Acer can now make a significant impact in the PC market for the first time in years, it also signals the end of one of the more significant, independent vendors in the IT industry during the last 20 years. When the company first went public in the early 1990s, it was valued at more than a $1 billion. When times changed, Gateway changed, too. However, its thinking always seemed to be just a little off from what the market wanted. "For me, the story of Gateway will always be about timing," Shim said. "When they first entered the direct market, they reaped the benefits for a long time," Shim added. "They were willing to go out on a [limb] with innovative products. They did a lot of stuff before competitors did and a lot of that karma eventually was spent up and they took a lot of risks that were always a little off. They pushed into retail a little too early and that didnt work for them. They then went into the digital home and they again were a little too early into the market." "They just seemed to pick the wrong model at a time when they just started to grow," Shim said. Check out eWEEK.coms for the latest news in desktop and notebook computing.


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