Acer/Gateway Targets Worldwide Reach

The news of the Acer and Gateway nuptials was hardly earth shattering, given the distant roles the two play in the U.S. PC market. Still, it does put Acer in a strong position to become a dominant global vendor, particularly if it decides to expand beyond just boxes.

Acer is primarily an international player while Gateway  is an American player. According to the second-quarter 2007 sales figures from IDC, Gateway was the No. 3 PC vendor in the U.S. in terms of units, with 5.6 percent of the market.

However, sales fell 7.1 percent from the same quarter in 2006. Acer was fifth with 5.2 percent of the market and 163.8 percent growth in the second quarter of this year. IDC reported that Acer was up 55 percent for the year, with all regions growing by at least 30 percent.

The selling price was so telling of the state of the PC industry. Gateway sold for $1.90 per share. In 1999, it traded for $80 per share.

“The PC market is broken,” Mark Margevicius, vice president and research director for Gartner told “The average selling price drops four to six percent every year. Margins are two to four percent. That’s not a desirable business to be in unless you can manufacture at less cost or you can differentiate around services.”

However, Margevicius does not think the Gateway/Acer/Packard Bell congregation is akin to HP and Compaq, which was poorly received at the time and described by Scott McNealy as a slow-motion slow-motion collision ” between two garbage trucks, while others described it as “two drunk sailors who have to lean on each other to stand up.”

“Gateway has an incredibly strong brand value here in the U.S.,” Margevicius said. “It is still viewed very much as the company that brought computers to the masses. It’s very folksy with the cow boxes and still resides well with customer minds.”

But Gateway has only enjoyed limited success selling to the enterprise market and has had next to no penetration outside the U.S. Acer, on the other hand, has a great international presence but a weak one in the U.S. market.

“They do compliment each other,” said Margevicius. “It gives them global reach and a huge channel that’s immediately filled. It’s tough to find retail space these days. Gateway with eMachines is already there.”

It won’t help Acer with its lack of enterprise presence, but the merger does give the company an opportunity to re-visit it in the future if it starts to build a services organization. A services strategy, not boxes, will be what makes the difference.

“They would be fighting with 800-pound gorillas in the likes of Dell and HP, which have stable product lines and services. So if Acer wants to grow in that space they have to deliver more than just the same old products that are available from the competition,” he said.

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