Just days after Taiwanese computer maker Acer Inc. announced plans to acquire Gateway Inc. for $710 million, Gateway’s school customers learned they will have a new supplier for sales, service, and support: Gateway has agreed to sell its professional business unit to Nampa, Idaho-based MPC Corp. in a separate, $90 million deal.
Under the deal, MPC Computers–a wholly owned subsidiary of MPC Corp.–will take responsibility for operations and warranty support services at Gateway’s professional business division, which sells computers and other services to education, commercial, and government customers.
“We believe that the customers of MPC and Gateway’s professional business will benefit greatly from this combination,” said John P. Yeros, chairman and CEO of MPC Corp.
“The new company will be totally focused on the markets of government, education, and small-and-medium business, and it will develop products and services to meet the specific needs of these customers. It will have the scale to enable it to compete better against larger rivals in the PC industry. In addition, our customers will gain access to a wider range of PC products and services and continue to enjoy high-quality, U.S.-based service and support.”
The combined revenues of the two businesses in 2006 were $1.2 billion, MPC said, which will make MPC one of the top computer companies in the U.S. targeting the professional markets of business, education, and government when the deal closes in early October.
MPC said it will continue to offer Gateway Professional products in the short term but will move branding from the Gateway name to the MPC brand within a year.
Because Gateway’s professional sales and service employees are moving over to MPC as part of the transition, schools and other Gateway Professional customers can expect their company contacts to remain largely the same, MPC said. The company also said it will honor all warranties and service agreements according to their stated terms.
The news followed on the heels of Gateway’s announcement in late August that it would merge with Acer in a major reshuffle of the world’s top computer companies.
That deal, expected to close by December, will push the combined company past China’s Lenovo Group Ltd. as the world’s third-largest vendor of personal computers, behind Hewlett-Packard Co. and Dell Inc.
With the acquisition, Acer will absorb a company that made a splash when it was founded in 1985 in an Iowa farmhouse.
Gateway’s made-to-order philosophy for selling computers made it a formidable player early on, and the brand became known for the cow-spotted boxes used to ship its products.
Now based in Irvine, Calif., Gateway struggled in recent years amid fierce competition.
It branched out into consumer electronics, selling televisions, music players, and other items, but the strategy didn’t work. Neither did its retail stores, which shuttered in 2004.
“Having tried for several years to grow their way back up through various strategies, it seems a reasonable step to consider joining forces with another company,” said Tom Smith, a computer hardware analyst with Standard & Poor’s Equity Research.
“Joining with Acer will enable us to bring even more value to the consumer segments we serve and capitalize on Acer’s highly regarded supply chain operations and global reach,” Gateway Chief Executive Ed Coleman said in a joint statement by the two companies.
In selling its professional business unit to MPC, Gateway will focus its resources on the consumer and home PC market.
Acer and Gateway have discussed merging in the past but intensified those talks during the past six weeks, Acer Chairman J.T. Wang said during a conference call with analysts.
Acer estimated that acquiring Gateway would create operating savings of more than $150 million a year and immediately add to its earnings.
The Acer-Gateway deal will create a multi-branded computer company with more than $15 billion in revenue and shipments in excess of 20 million units per year, Acer said in a statement.
“This will be an excellent addition to Acer’s already strong positions in Europe and Asia,” Wang said in the statement.
Acer has stated that it plans to keep the Gateway name and aim those machines at the high-end consumer market.
In the second quarter, Acer was the world’s fourth-largest PC maker behind top-ranked Hewlett-Packard, No. 2 Dell, and third-ranked Lenovo, according to research company Gartner Inc.