Gateway Inc said Friday that it would buy privately held eMachines Inc, for US$30 million in cash and US$50 million in Gateway stock, in a deal currently valued at US$266 million.
The deal, which comes one day after Gateway posted its 12th loss in 13 quarters, is the latest effort by the beleaguered company to stanch its losses and capture a bigger share of the market for low-end personal computers, which eMachines has shown rapid and consistent growth.
Word of the merger was well received on Wall Street, where Gateway stock rose US$0.63, or 15 percent, to US$4.72. Technology analysts viewed the merger as a positive move for both companies, but particularly for Gateway, which on Thursday posted a fourth-quarter loss of US$114 million, or US$0.35 a share, compared with a US$72 million loss, or US$0.22 a share, for the same period in 2002. Sales last year were US$3.4 billion, a 19 percent drop from sales of US$4.2 billion in 2002.
When the deal closes in the coming weeks, the combined company will become the third largest PC maker in the US market, behind Dell and Hewlett-Packard.
Wayne Inouye, the chief executive of eMachines, will become chief executive of Gateway and Ted Waitt, the founder and chief executive of Gateway, will remain the company chairman.
Industry analysts said the deal makes sense because it gives eMachines, based in Irvine, California, needed capital and access to a larger product line and gives Gateway, based in Poway, California, needed access to the low-price PC market and chain stores where eMachines has established relationships. This is important to Gateway because its own retail stores have done poorly.
"This gives Gateway flexibility in dealing with its stores and a new distribution channel," said Roger Kay, an analyst with IDC, a market research firm. "The stores have been a potential albatross. They won't abandon the stores immediately but now they have an exit strategy."
He said the deal would give eMachines access to Gateway's US$1.1 billion in cash. EMachines has been one of the fastest-growing personal computer makers in the US market, with US$1.1 billion in revenue last year and profitability for nine consecutive quarters.
Gateway, however, has continued to struggle despite several restructurings and after its renovation of its retail stores last year to compete with Best Buy, Sam's and other discount outlets.
The company's move into consumer electronics, like its new line of plasma televisions and digital cameras, has gone well but its PC sales have continued to decline, prompting some to predict that Gateway would have to leave the PC business eventually.
A Gateway spokesman, Brad Shaw, said the company would continue to sell its products through its stores and eMachines, which would remain a separate brand, would continue to be sold at big box retail outlets.
"We're still firmly committed to the PC business," Shaw said. "We've never said we would turn away from the PC and, if anything, creating this new relationship should validate that."
Shaw added that the eMachine deal would help shrink operating losses as Gateway moves through last year's restructuring effort. He declined to say whether layoffs or store closings would be necessary.
"Clearly, a big part of the strategy for creating a merger is to drive cost reductions," he said. "It's too early to speculate but the stores are something we continue to look at and evaluate on an individual and a channel basis."
Kay said Gateway should benefit from eMachines' successful business model and its management strategies while creating a company of a size sufficient to compete with the PC giants. The merger, he said, was representative of overall changes in the PC market.
"We're in the early-middle age of maturity of the PC market," he said. "At this point, it's going to be a matter of who is the last man standing -- so bulk counts."
BYPASSING CHINA TARIFFS: In the first five months of this year, Foxconn sent US$4.4bn of iPhones to the US from India, compared with US$3.7bn in the whole of last year Nearly all the iPhones exported by Foxconn Technology Group (富士康科技集團) from India went to the US between March and last month, customs data showed, far above last year’s average of 50 percent and a clear sign of Apple Inc’s efforts to bypass high US tariffs imposed on China. The numbers, being reported by Reuters for the first time, show that Apple has realigned its India exports to almost exclusively serve the US market, when previously the devices were more widely distributed to nations including the Netherlands and the Czech Republic. During March to last month, Foxconn, known as Hon Hai Precision Industry
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and the University of Tokyo (UTokyo) yesterday announced the launch of the TSMC-UTokyo Lab to promote advanced semiconductor research, education and talent development. The lab is TSMC’s first laboratory collaboration with a university outside Taiwan, the company said in a statement. The lab would leverage “the extensive knowledge, experience, and creativity” of both institutions, the company said. It is located in the Asano Section of UTokyo’s Hongo, Tokyo, campus and would be managed by UTokyo faculty, guided by directors from UTokyo and TSMC, the company said. TSMC began working with UTokyo in 2019, resulting in 21 research projects,
Ashton Hall’s morning routine involves dunking his head in iced Saratoga Spring Water. For the company that sells the bottled water — Hall’s brand of choice for drinking, brushing his teeth and submerging himself — that is fantastic news. “We’re so thankful to this incredible fitness influencer called Ashton Hall,” Saratoga owner Primo Brands Corp’s CEO Robbert Rietbroek said on an earnings call after Hall’s morning routine video went viral. “He really helped put our brand on the map.” Primo Brands, which was not affiliated with Hall when he made his video, is among the increasing number of companies benefiting from influencer
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) yesterday expressed a downbeat view about the prospects of humanoid robots, given high manufacturing costs and a lack of target customers. Despite rising demand and high expectations for humanoid robots, high research-and-development costs and uncertain profitability remain major concerns, Lam told reporters following the company’s annual shareholders’ meeting in Taoyuan. “Since it seems a bit unworthy to use such high-cost robots to do household chores, I believe robots designed for specific purposes would be more valuable and present a better business opportunity,” Lam said Instead of investing in humanoid robots, Quanta has opted to invest
RSS