Gateway Finds its Way Back to Relevance, Thanks to Acer

News Analysis: Gateway can once again become a trendsetter, but only if Acer proves its marketing mettle.

When it first started in the mid-1980s, Gateway turned itself from a small company with cow patterned boxes into a powerhouse of a PC vendor that had the ability to mold and shape the personal computer market in new ways.

Now, Gateway once again has the ability to change the market place—only this time it will be as a newly acquired division within Acer, which purchased the struggling Irvine, Calif., vendor this week for $710 million.

Almost immediately after Acer, which is based in Taiwan, announced that it had purchased Gateway at a $1.90 a share, the two companies dropped a second piece of news on the market—Gateway would use its right of first refusal to bid for the parent company of Packard Bell, a large supplier of PCs to Europe.

It was an interesting move, since Lenovo had expressed interest in buying the French company to expand its struggling European operations. In an email to eWEEK, a Lenovo spokesman noted that it remains interested in Packard Bell, which could set up a fight between the new Acer and Lenovo for control of the company.

Outside of making waves in Europe, the joining of Acer and Gateway also represents a chance to shake up the U.S. market. While Gateway has managed to lose share during the past few years—it also has little international presence to speak of—Acer has been surging within and outside the U.S. with a line of sleek, low-cost notebooks.


To read more about what the Acer/Gateway deal means for the channel, click here.

The latest quarterly numbers from IDC show Acer increased its market share by about 163 percent in the second quarter of 2007, compared to 2006, in the U.S. In the worldwide market, the company increased its shipments by 55 percent during that same time.

When Acer announced its deal to buy Gateway, executives said that acquisition would create the worlds third largest PC vendor in terms of shipments. The combined entities are poised to ship 25 million PCs in 2008 compared to 20 million this year, according to an analysis by TBR (Technology Business Research).

However, a good quarter does not guarantee success. Richard Shim, who follows the PC market for IDC, said that Acer needs to do more than just combine its shipments with Gateways shipments to become a major player in the PC space. The company must now try to grow its business organically by using the Gateway name and its products to enhance its own line of consumer-centered laptops.

"Acer can not wait two years to maximize the value of this deal," said Shim. "It is a recognition of where the PC industry is right now and Acer can become vulnerable before it hits its stride. The other factor is the consumer market is fickle. It has grown really quickly in the last two and a half years and that kind of pace is not going to continue, which will add additional pressure. They have to get moving now to take advantage of their window of opportunity."

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