Acer, Lenovo Deals Just the Beginning?

Analysis: Why Asian companies lusting after American gems is more than a trend.

A rash of acquisitions and near-acquisitions by Asian PC manufacturers may signify that companies dedicated to design and development of low-end PCs have greater ambitions and are interested in moving up the food chain.

In the past week, Taiwanese PC manufacturer Acer purchased U.S. PC manufacturer Gateway, while Chinese computer maker Lenovo is strongly rumored to be interested in purchasing hard disk drive manufacturer Seagate Technology, also based in the United States. Lenovo also has been long been rumored to have its eye Lexmark in an effort to enter the printer business with a bang.

Although there is nothing in these acquisitions to show that Asian manufacturers are dissatisfied with simply providing low-end labor and assuming the design end of production, they do underline the idea that Asian companies see the potential in selling branded products and believe they can gain more global leverage through strategic purchases.

"In the PC world, the Taiwanese have very mixed results in delivering branded solutions to the U.S.," said Stephen Baker, vice president of industry analysis with The NPD Group Inc. of Herndon, Va. "While they have done it in the accessories and peripherals markets, at times they have also met with some failures,"

That fact, combined with a desire to move away from entry-level brands into the higher-end market, was a major reason for Acer buying Gateway, Baker said.

Thats also true of Lenovo.

"Lenovo wanted to go from having the cheapest end of the market to saying they could make a machine thats just as good and popular as a Dell or HP machine," said Douglas McIntyre, editor of 24/7 Wall St., a Web-based analytic publication focused on both domestic and global markets. "They believe they can get the best of both worlds."


Click here to read more about Acers acquisition of Gateway.

In general, its a good move for Asian manufacturers to take a piece of the U.S. technology pie, McIntyre said.

"Buying market share is probably the fastest way for these companies to pick up customers," he said. "Basically, they have two choices: spend years trying to brand themselves into these markets, or buy into them by picking up some of the weaker players and reducing their costs significantly."

And the industry is likely to see more Asian companies buying U.S. technology manufacturers, said Roger Kay, president of Massachusetts-based Endpoint Technologies.

"We are likely to see more of these types of deals, inasmuch as the U.S. government allows them to complete," he said.


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