January 30, 2004

Gateway makes bid for rival eMachines

My spin: In a nutshell I think Gateway is biting off more than it can reasonably swallow.

Cnet: Gateway, of Poway, Calif., plans to purchase privately held eMachines for $30 million in cash and 50 million shares of stock. The companies' combined PC businesses would make Gateway the third-largest PC manufacturer in the United States, the company said, and rank it eighth in the world. The deal is subject to regulatory approval, and is expected to close in six to eight weeks.

The purchase comes as a response to Gateway's shrinking unit sales of PCs. During the fourth quarter, Gateway sold only 526,000 PCs, a 6 percent sequential decrease and a 27 percent decline from a year ago. Meanwhile, eMachines has been growing. The PC maker has expanded its model lines to include notebooks and also offers the latest processors from Advanced Micro Devices, where Gateway has offered only Intel-based PCs for the last several years.
(full story)

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