Gateway buy eMachines

[bernse]

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SAN DIEGO - Gateway Inc., hoping to reverse its sagging fortunes in the personal computer business, said Friday it would buy privately held eMachines Inc. in a deal valued at $235 million.

The combined company would create the third-largest PC company in the U.S. market ? still far behind Dell Inc. and Hewlett-Packard Co. ? and give Gateway a stronger presence in low-end computers.

"We've always struggled at the low end of the PC business," said Rod Sherwood, Gateway's chief financial officer.

The agreement came one day after Gateway posted its 12th loss in 13 quarters, a result of sharply declining sales and charges related to its makeover from a personal computer maker to consumer electronics company.

Last year, Gateway's PC shipments fell 24 percent to just under 2.1 million units.

Ted Waitt, who founded Gateway in 1985, said skepticism by analysts about the future of the company's PC business, which still accounts for about 70 percent of its revenue, "basically gets answered" by the acquisition.

Under the terms of the deal, Waitt will relinquish his role as chief executive to Wayne Inouye, who holds the same job at eMachines. Waitt will remain Gateway chairman.

Also, eMachines will get 50 million Gateway shares, valued at $204.5 million at Thursday's closing price of $4.09 on the New York Stock Exchange (news - web sites), and $30 million cash.

Irvine-based eMachines had revenue of $1.1 billion last year and has been profitable for nine straight quarters. The company declined to provide additional financial information.

Gateway, based in the San Diego suburb of Poway, had revenue of $3.4 billion last year. It said it expected to return to profitability in 2005

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[DevilsAdvocate]

Looks like Gateway may be looking at entering retail channel sales.

Kinda interesting.

 

[vi edit]

HTF can Gateway *afford* to buy Emachines?

Aren't they borderline bankrupt?

 

[Ciber]

Originally posted by: vi_edit
HTF can Gateway *afford* to buy Emachines?

Aren't they borderline bankrupt?

Did you not read the post? Most of the money is Gateway shares.

 

[BigSmooth]

Originally posted by: vi_edit
HTF can Gateway *afford* to buy Emachines?

Aren't they borderline bankrupt?

Emachines was probably free after rebate.

 

[bernse]

Originally posted by: BigSmooth

Originally posted by: vi_edit
HTF can Gateway *afford* to buy Emachines?

Aren't they borderline bankrupt?

Emachines was probably free after rebate.

LOL! :beer:

 

[Chadder007]

Yet....Gateway keeps screwing up now....
"Hmm lets change our image (Sales decline) , Lets change from Computers to electronic sales also, (Sales decline), Lets bring out our own stores and call it Gateway Country, (Sales decline and half the stores eventually fold), Even better....lets buy Emachines!!!"

WTF are they thinking?

 

[GTaudiophile]

Gateway, like Disney, is a sinking ship.

 

[vi edit]

Originally posted by: Ciber

Originally posted by: vi_edit
HTF can Gateway *afford* to buy Emachines?

Aren't they borderline bankrupt?

Did you not read the post? Most of the money is Gateway shares.

Yes I read the post, but I still find it...interesting...that it's possible given Gateways horrid track record over the last oh..5 years. What worth is a stock that is continually dropping?

 

[Wuffsunie]

Wow. If I were the guy who ran eMachines, I'd have told Gateway to "take a hike! I like my business to be profitable."

 

[bernse]

Originally posted by: Wuffsunie
Wow. If I were the guy who ran eMachines, I'd have told Gateway to "take a hike! I like my business to be profitable."

Or, if you're the executives with lots of eMachines shares, take the $$$ and run!

 

[Chucko]

I don't see Best Buy, Circuit City, and other retailers allowing the eMachine brand to remain in their store. I think that this will help HP leverage the Compaq "value" retail brand better and eventually take the eMachine shelf space. This is in my opinion can only benefit HP, because I think that eMachine will make a u-turn and lose much of it retail presence. I guess I should say that it depends on how influencial HP/COMPAQ can be with the retailers.

 

[Deeko]

I think its funny that they shipped about the same number of units, but because Gateway sells higher end stuff/other stuff, their revenue was over 3 times higher, and on computers higher end stuff has a lot more profit, and because of the incredible lack of overhead in emachines they are profitable and gateway isn't. Emachines only has 138 employees! Come on, my Circuit City store almost has that many employees.

 

[AnyMal]

That just plain sux! There goes Emachines down with Gateway

 

[Ketteringo]

I thought Dell owned a large percentage of Gateway?

 

[TheToOTaLL]

Originally posted by: ANY5546
I thought Dell owned a large percentage of Gateway?

LOL, ummm no

Gateway wished it was Dell. Think of all the money they have pumped into their retail stores, yet Dell can get away with being a "order only" OEM, and only recently entering the retail market.

 

[Ness]

This means that we'll have clearances on emachines at Staples by the end of the summer when both emachines and gateway tank together


the HD forum will be on the edge of their seats!

(RossMAN will take 20)

 

[styrafoam]

Originally posted by: vi_edit
HTF can Gateway *afford* to buy Emachines?

Aren't they borderline bankrupt?

A few years back Gateway built a large production facility just outside of Salt Lake City, I don't think it was active for more than 18 months before they closed it up. It's still sitting empty today.

 

[soflawill]

gonna be in the deep doodoo again. just told my bro to buy an emachine over a HP(hey, am tired of building for the family). funny thing is, this one replaces a gateway p233 he had. are they gonna be livid when emachines goes tits up due to gateway. I think Ted's ponytail has cut off the brain circulation. just when emachines is finally getting a rep as a decent store machine, they go and do this-well if i am the big stockholder at emachine, i cash out as soon as sec regs allow