Gateway-eMachines Merger: Beware the Retail Juggernaut?
HP was right in predicting further consolidation in the market, but not necessarily online. Are Dell and IBM heading for a fall?Carly Fiorina got it right: For some time, the HP CEO has been saying the marketing will continue to consolidate, and todays news that Gateway plans to buy eMachines proves the wisdom of her words. Interestingly, this merger was prompted more by Gateways desire to expand its retail presence than any move to push online sales. And if HPs and Gateways collective acquisitions lock down U.S. retail, both Dell and IBM may be caught flat-footed. Gateway has simply been unable to bring its costs in line with Dells. By contrast, eMachines is more efficient then Dell, and it is eMachines CEO Wayne Inouye who has been tapped to run the combined entity. There will undoubtedly be some cuts, but with Inouye at the helm, they will likely be better-balanced between the two corporate parents.
One of the quiet beneficiaries in this merger is AMD, which lost Gateway some time ago when the PC maker went Intel-only. eMachines is one of AMDs biggest clients, and it has made a good business selling low-cost products based on AMD technology. As the combined company focuses on cost and increased competition in retail, AMD again becomes a strategic partner for Gateway; the merger could increase AMDs sales and expand Gateways tool set.