Acer to Acquire Gateway for $710 million

downix writes "On the way into work today, I heard about Acer buying Gateway. A bold move strategically, I wonder what consequences this will have for Gateway's employees and customers. As the purchase price was at $1.90 per share, those of us that purchased Gateway shares a few years ago are reminded just how far it has fallen."

Comments

Customers?

[ThePolkapunk]

"I wonder what consequences this will have for Gateway's employees and customers."

Gateway has customers?!

Re:Customers?

[eln]

It's even funnier than that. According to the article, Acer only bought Gateway because Lenovo beat them to their first buyout target: Packard Bell!

So apparently their goal was to buy the shittiest computer company in existence, but they were stymied in that goal so they bought the second shittiest. Personally, I was surprised to see that both Packard Bell and Gateway still existed, but I guess when the CEO of Acer finds extra change in his couch cushions, he has to spend it on something.

Re:Customers?

[morgan_greywolf]

Personally, I was surprised to see that both Packard Bell and Gateway still existed, Packard Bell just doesn't sell in the United States anymore. They have some notebooks and some GPS devices and some USB-pen-drive-sized USB player. They got the reputation has being the crappiest computer company EVAR and were never able to quite live that down in the U.S. market.

Re:Customers?

[Colin Smith]

Remove the cheapest competitors from the market and the average profit per unit increases.

Re:Customers?

[jcr]

Their stores were what killed them. They spent a pile of money and put stores up everywhere, with little to no thought about whether any given location made sense or not. Apple's retail operation is a textbook case on how to do it right. Gateway's is a textbook case on how to botch it.

-jcr

Re:Customers?

[philwx]

I remember back in the early 90s when Gateway was a "rebel" clone company against the IBM PC's. They were the underdog with mail order customizable computers and fair prices. Unless my memory fails me.

Then after a little success, in come the greedy execs that try to go for the lowest denominator in quality that can still pass for functional; now it's trash years later. Where do the execs go? They find another company to ruin.

Re:Customers?

[o'reor]

Despite the reputation, I bought a Packard-Bell notebook in January, and I've been quite happy with it so far. But then again, it's a notebook. No try to change various parts and therefore I did not hit compatibility problems with those parts. Linux (Mepis 6.0, Mandriva 2007, Fedora Core 6) installed flawlessly on that machine too.

So maybe they've gotten better after all... just my 2c anyway.

Re:Customers?

[Herkum01]

What killed them was when the owner/founder of the company handing the reins over to a IBM manager/friend. This friend convinced him that he knew exactly how to run a large business and ended turning it into a large corporate bureaucracy. At that point it became a company of bean counters( customer service agents who would hang up on the customer after 12 minutes), management cronies and corporate meetings to play the blame game.

Re:Customers?

[demonbug]

I had (and still have, though it is my "backup" - it works, but the battery lasts about 30 seconds at this point) a Gateway laptop. I was very happy with it. While traveling, I ran into the need for a car adapter. No Problem, I thought, I can just head over to one of those new Gateway stores they're putting up everywhere and pick one up!

Nope. I find a store, ask if I can get a car adapter for my notebook, only to find out that Gateway stores don't actually carry anything, you can only order items from them. Not just power adapters (which I suppose aren't needed terribly often) - they don't stock anything. It was then that I realized Gateway was going to die - they spend all this money building stores all over the place, and then they don't even bother to stock them with a few useful items that their customers are likely to need. They basically just massively increased their costs without really offering any new or useful services. Brainy move!

I do still like that laptop, though.

Re:Customers?

[garcia]

Their stores were what killed them. They spent a pile of money and put stores up everywhere, with little to no thought about whether any given location made sense or not.

It had to do with the fact that suddenly they had retail stores that still required you to do mail order to get the stuff *and* you now had to pay sales-tax!

How that made any sense I'll never know. Back then, the reason for going to the mail order places was to avoid sales tax. Yeah, you took a hit on shipping but you got a near custom built machine (if you so desired) for less or the same price as an in-store brand before sales tax.

Once they had you paying both shipping and sales tax for a third rate computer dumbed down to below consumer level, it wasn't worth it anymore.

Re:Customers?

[mabhatter654]

not having any ACTUAL COMPUTERS at the stores was the downfall I think. They had a lot of things like the Apple store, classes, training, but no repair, upgrade or hardware sales! It would seem to defeat the purpose of putting all the cool computers out there only to tell you to order it and wait 2 weeks for shipping. I also find my local "screwdriver" shop does this to. The point of being a computer store it to walk in and buy stuff!!! If you can't do that one simple thing, then I might as well go to BigBox where I can take home a crappy computer and take home the parts to upgrade it myself!!!

Re:Customers?

[broggyr]

I sure hope they didn't consume their computers - would be bad for digestion ;)

Re:Customers?

[jollyreaper]

I do still like that laptop, though. Since only a few companies actually make laptops and they're basically made to order for a given brand, just find out who made your Gateway when you're looking to replace, then see who they're building for. I love my Acer laptop even though the company's support ranks below Dell (yes, below Dell! That bad!). When it dies, I'm certainly going to find out who the original guys are building for then.

Re:Customers?

[heinousjay]

My statement does not conflict with yours either.

This is nice, it's like Slashdot only happy and sweet.

Re:Customers?

[Anonymous Coward]

From personal experience I can shed some light on that.

Gateway before then had a good reputation for customer service. lifetime service and most of the reps you'd talk to would solve your problems, period. In fact if a Gateway Tech wanted to "Nuke" a system (format/reload), they had to get permission from a senior rep who would grill you on your troubleshooting thus far, approvals were only given to cases with merit. About that time (late 2001) Gateway owned and operated most of it's own call centers.

Fast forward 6 months and one of their last call centers (actually one of their best) was being closed down in favor of outsourcers who got paid almost half of what we did. We had already experienced the aftermath of these "outsourcers", they had no real formal PC support training, worked on multiple "accounts" (not just Gatway, and not just PC support), and were having customers Format Reload as if it were the *only* troubleshooting step.

Funny thing is a good percentage of our calls those last months were people calling back because they were told to Format Reload for an issue that didn't require it (say a defective soundcard/ speakers/ etc) and thus needed *more* support. Anyway, the main thing GW had going for it was it's good customer service, but that was done away with to "cut costs"....

In retrospect, aside from getting laid off (along with 400 or so other people in the same town), Gateway used to be a great company to work for. They cared for their employees (as well as their customers). Some of the best benefits I knew of for the time, very good pay (though not extravagant), and incredibly good training. I can say that when we were laid off we were taken care of, we were all given 2 months, 3 weeks pay as a minimum severance *and* GW hired some folks for 2 months to help us hone our interviewing skills and find jobs (even hosted a job fair in the old call center).

Sorry to be posted anonymously, but that big check at the end came with an NDA.

Re:Customers?

[AndyChrist]

Things went to shit WAY earlier than that.

As early as 1997, they were known by computer support at my university as "Rapeway."

They had built a reputation for quality and service, but then decided to abandon both and ride that reputation into the ground, selling inferior, unreliable hardware at the prices their name commanded them before their fall.

Packard Bell did this, albeit with a stolen pseudo-reputation (along the lines of Rockwood or Kenford). Compaq did it. HP seems to be in the process of doing it, and Dell is flirting with it. The Big Three US automakers did it. It's a decades-long, proud tradition of failure.

Re:Customers?

[torrentami]

I guess Wang Computers wasn't available.

Re:Customers?

[Bill_the_Engineer]

Don't forget that having a local presence made all Gateway purchases subject to both state and local sales taxes. This gave them a final cost disadvantage when compared to Dell that didn't have such tax requirements.

Re:Customers?

[belmolis]

How do you find out who the actual manufacturer is and who they are building for now?

Re:Customers?

[TekPolitik]

So apparently their goal was to buy the shittiest computer company in existence, but they were stymied in that goal so they bought the second shittiest.

They bought themselves?!?!?!

two wrongs don't make a right

[Anonymous Coward]

what are they trying to do, build the suckiest computer evar?

Re:two wrongs don't make a right

[jcr]

Wow, talk about damning with faint praise...

-jcr

Re:two wrongs don't make a right

[S.O.B.]

Several years ago my mother bought a Gateway, and that was when I learned to use a PC. It was a P133, with 32MB RAM and a 1.5GB hard drive, and it ran Windows 95 (go ahead and laugh, I know I do when I think about it).

More than several years ago (24 years ago to be exact) I worked on a brand new IBM XT with an Intel 8088 running at 4.77MHz, 128KB of RAM and a 10MB hard drive. It ran IBM DOS 2.1. In modern terms that would be a 0.00477 GHz processor with 0.000128GB of RAM and a 0.010GB hard drive. When I think about it I don't laugh...I cry.

Re:two wrongs don't make a right

[turnipsatemybaby]

Whoa... you had a hard drive?

I didn't even get that much. I had two floppy drives and that's it.

Cue the "luxury" jokes in 3...2...1...

Re:two wrongs don't make a right

[UncleTogie]

I had two floppy drives and that's it.
Lucky, you had floppies. :P Try waiting 10 minutes to load a 16K program from cassette, just to find the volume was too low/high and you had to start over. Wish I still had the box, even if you *can* find TRS-80 emulators out there...

Re:two wrongs don't make a right

[Anonymous Coward]

You guys are so lucky! In my time this type of threads were considered LAME!

..and nothing of value was lost...

[RLiegh]

Seriously, Gateway has always made really crappy computers. Compaq and Gateway are two brands I've always gotten burned on (weird, non upgradeable components that basically mean your box is worthless after a couple of years).

Re:..and nothing of value was lost...

[99BottlesOfBeerInMyF]

Seriously, Gateway has always made really crappy computers.

I've never purchased a Gateway, but I do follow the trends in reliability, price, performance, and support from major vendors. Objectively, Gateway has not "always" made crappy computers. Instead they followed a common trend in computer manufacturing/sales. Within the first few years they made quality machines and had excellent support, both better than average for the price. Then, when they had a reputation and brand, the company executives cashed it in for quick profit by selling machines made more cheaply and poorly and counting on their reputation to get people to buy. The exact same thing happened with Alienware about a year before Dell bought them.

Sometimes at a later date a company can reverse course to some degree. Dell's laptops, for example, have gained in quality and reliability over the last few years and are no longer the cheapest junk they can assemble using whatever is inexpensive today. Usually, however, with enough customers pissed off and vowing never to buy crap from Brand X again, it makes more sense in business to simply start Brand Y and count on consumers do not do any homework or even look at consumer reports instead of the TV ad where the guy says its a good deal.

Re:..and nothing of value was lost...

[massysett]

weird, non upgradeable components that basically mean your box is worthless after a couple of years

That's true for Dells too, which has me wondering if it is true for all systems from vendors of any size.

I had a Dell desktop. The motherboard was made just for Dell. The motherboard connectors for the USB, front-panel sound, hard-disk LED, etc. were all non-standard. Instead of having separate little pinouts and wires for each one, the system used a single ribbon cable to connect all these ports and LEDs to the case. So, forget about getting a replacement mobo from anyone but Dell.

Similarly, the power supply was nonstandard. A standard ATX power supply has a power switch on the back; a Dell PSU does not. This would not be a terribly big deal, but the case does not have a cutout for a power switch on the PSU, making it impossible to put anything but a Dell PSU in there.

I used to curse Dell for this. Then I built my own system. The case has at least a dozen wires coming out of it--power LED, power switch, reset switch, USB front panel, front-panel audio, etc. All these connect to various places on the mobo. It would be pointless for Dell factory workers to plug in a dozen little wires when they can just get their own, custom-made ribbon cable. That's one less opportunity for the factory worker to screw up. Then, consider the power supply. You and I both know to check that switch on the back of the standard PSU. But the average computer user won't know that. His kid will flip it off, then he'll call Dell and say his computer is busted. Tech support will have to go through one more step on the phone, and for what? So geeks like you and I won't complain that the PSU is non-standard?

Don't get me wrong, I would never buy another Dell desktop. But I think the parts are nonstandard for good reason. They don't seem to make things nonstandard just for the sake of making them nonstandard--for instance, hard drives and optical drives are perfectly standard on Dell machines and readily replaced. If Dells, Compaqs, and Gateways all have nonstandard parts, it's probably a safe bet that any big vendor uses nonstandard parts--and for the same good reasons.

The only cure I can think of is to change standards like ATX so that PSUs have no switch and so that everyone is shoehorned into the same ribbon cable--a cure that's worse than the disease. For now, those who know can just stick to Newegg. Everybody wins.

Acer buying anything?

[bstorer]

Amazing. Considering the Acers I've used, it's shocking that they're still around, let alone capable of buying another company!

Wonderful news

[Stanistani]

They have the potential to be the next Packard Bell.

Re:Wonderful news

[DaveWick79]

Under the radar of most US consumers, Packard Bell has actually become a fairly reputable manufacturer again in Europe. Last I heard they were putting out fairly good product.

The reason that Gateway and Lenovo are interested in Packard Bell is so they can capture some of the European market without having to go into it starting with nothing.

As a former Acer reseller

[CodeShark]

What most people don't realize is that for years Acer was one of the largest sources for COMPONENTS, not finished systems -- so they tend to weed out poor components first, resulting in better systems at the end of the assembly chain.

So [as a former Acer reseller / small business consultant who moved more into data engineering and away from hardware by choice, not necessity] I would have to say that "this figures". Why? Because I could always upgrade the Acer machines I bought/sold to my clients, and in all of the sites I ever sold to and supported I think I had one machine failure before "end of cycle", i.e., about 3 years later when the cost benefit ratio for a new machine becomes higher than the cost of maintaining an old one. Versus the Gateway, Packard Bell, or even Dell reputation for crap service.

Hmmm. I wonder if this might actually make Gateway stock worth *something* again....

Dinosaurs mating...

[jht]

This takes two companies with minimal brand equity and merges them to provide better buying power and a lower cost of goods. The fact that Gateway was worth only $710 million despite being the third-largest vendor here in the US should say something right there. And it's not good.

Market Cap of some major US PC vendors:
HP 125.68B
Apple 115.8B
Dell 61.63B
Gateway 676.29M

See an interesting trend? Gateway would be pocket change to any of those bigger companies. Basically, they died in retail, were taken over from within by E-Machines (even though Gateway bought E-Machines, the execs from E-Machines wound up in charge - just like when NeXT was bought by Apple) and stabilized just enough to turn into the company into bait for Acer.

Goodbye, Gateway...

Re:Dinosaurs mating...

[jht]

A few NeXT alumni that either are or were Apple executives:

Avie Tevanian - Past Senior VP of Software Engineering, primary architect of Mac OS X/NeXTstep
Bertrand Serlet - Senior VP of Software Engineering, Avie's successor
Sina Tamaddon - VP of Applications
Jon Rubinstein - former VP of hardware development

Basically, when Steve took over within a short time virtually all the Apple folks who Steve didn't want around were sent packing and replaced by NeXT folks. They pretty much took over Apple from within.

Re:Gateway after sales service sucks

[Waffle Iron]

I had one of their Ferrari 3200 laptops

Ah yes, combining the prestige of a Taiwanese electronics OEM with the affordability and reliability of an Italian sports car manufacturer. It's a match made in heaven.

2 things

[kilgor3]

Are they outsourcing the jobs? and I hear a lot of Gateway bashing here. It's understandable, but 8 years ago I bought a gateway. It FINALLY died about 2 weeks ago. This computer handled being on almost everyday, over 150 linux installs a few windows installs and has NEVER been cleaned out with a vacuum or anything. It's dirty as hell and I'm affraid to open it to fix the damn thing. I primarily used this computer for 2 things; 1) Testing all the latest linux distros 2) Downloading my pr0n, warez and music. I think it would still work if I popped another hard drive in. So all in all I had an AMAZING Gateway experience. I wouldn't buy another pre-made PC now that I use laptops and build my own PCs. I needed the Gateway for school at the time and didn't have the time to build my own.

Re:Juding by your figures, Apple looks real good..

[jht]

Remember, though - part of what builds stock value is the perceived upside of the company business. Apple is strong because even though their market share is small, their growth is higher than most and they dominate the music player biz and have been expanding with success whenever they go (iPhone, anyone?). HP is driven by their printer business and their services besides PC, and Dell has volume and low costs. Gateway, though, has nothing unique. So analysts look at them and say "meh" - ergo a low valuation despite the sales numbers.

The market is a funny place.

I remember

[simontek2]

I remember when working at the Gateway store, we all got the calls they were shutting down the stores, on April first. It was one of those "great" april fools jokes, that was real. I also remember how much trouble I got for repairing a motherboard with bad capactors by just replacing them with new ones. apparently no one knew how to use a soldering iron.

What? This was perfect execution!

[raehl]

Apparently you've never been to a no-Computer store before. It wouldn't be a very good no-Computer store if it had computers there now, would it?

And Gateway's no-Computer stores succeeded beyond their wildest expectations, selling record numbers of no-Computers!

It's rare that a company can conceive and execute a new strategy like this so successfully. In fact, the Gateway no-Computer stores were SO successful, they even increased the no-Computer sales on the web sales side!

By buying Gateway, Acer is hoping to extend Gateway's no-Computer sales model to also sell no-Servers, along with no-Monitors and no-Projectors.

My Memory

[Physician]

My first computer was a Gateway with a 180 mhz Pentium Pro running Windows 95. That was some serious muscle in the day. Because I kept screwing around with various software I had to call tech support fairly often but back then they all spoke English and when the call was over my computer was working again. Once my RAM went bad and they replaced it without question. That's why my second computer and the one I'm still using is also a Gateway.