Acer's Gateway to the U.S. Market

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Gateway obtained that right through a complex series of transactions. According to people familiar with matter, Hui later sold his Gateway holdings and bought Packard-Bell himself—and in the process persuaded Gateway to let him out of a noncompete agreement that forbade him to acquire any competitors. In exchange for permission to break the noncompete, Gateway secured the right of first refusal to buy any of Hui's companies before he would be allowed to sell them to another competitor. Gateway's move kills a pending bid for Packard-Bell by China's Lenovo, which has been coveting an entrance into the European PC market. For Acer it's a defensive play, meant to keep Lenovo's European ambitions in check. The combination of Acer, Gateway, and Packard-Bell would rival Dell in the European notebook business, says analyst Roger Kay of Endpoint Technologies Associates.

Silver Lining for Dell?

As Gateway combines with Acer, it's also shedding its professional sales unit to a yet-unnamed third party. Insiders tell BusinessWeek.com that the leading candidate is MPC Computers, an Idaho-based PC vendor that began its life in the mid-1990s as a unit of chipmaker Micron Technology (MU).

Even as the Acer-Gateway combination creates a more formidable competitor, it could create an unintended boon for Dell's retail sales strategy. Dell has announced plans to sell PCs through WalMart Stores (WMT) and may sell its machines through other retailers (see BusinessWeek.com, 5/24/07, "Dude, You're Getting a Dell—at WalMart"). By cutting the number of PC makers supplying retailers with desktop machines from three to two, the deal could create an opening for Dell, says Steve Baker, retail PC analyst at NPD Group. "This might make retailers more receptive to what Dell has to say," he says. "Retailers never like having only two choices."

Complementary Brands

So what are the chances that this latest iteration of Gateway will roar back? One certainty is that Acer will attack the U.S. market with several brands. Acer President Gianfranco Lanci says all the brands currently in the portfolio will remain on the market. In addition to the eMachines and Gateway brands, Acer will bring its own brand and a high-end boutique brand of notebooks, Ferrari—the name licensed from the Italian sports-car maker that is a unit of Italy's Fiat. "We plan to keep all the brands and position them differently for different customers," he says.

The decision to maintain different brands while ensuring they don't overlap is one that has served HP well. "It's almost an ideal combination of brands," Kay says of those brought together by Acer-Gateway. "EMachines is low-cost desktops, Acer is low-cost notebooks. Then there's Gateway in midrange desktop and notebooks, and finally Ferrari. It's a more sensible deal than, say, HP and Compaq, with a lot less overlap."

Hesseldahl is a reporter for BusinessWeek.com.