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BIZCHINA / Center

Acer move may hurt Lenovo

By Wang Xing (China Daily)
Updated: 2007-08-29 11:45

Acer's agreement to take over Gateway Inc may foil Lenovo's plan to
acquire Packard Bell and will pose a real threat to the mainland
company's status as the world's third-largest PC maker.

Acer said on Monday that it plans to acquire Gateway, the third-largest
PC maker in the United States, for US$710 million, at US$1.90 per share.
The company said the deal was approved unanimously by the boards of both
Acer and Gateway and is expected to be sealed by December.

Gateway said it plans to exercise its right of first refusal to acquire
all shares of PB Holding Company, the parent company of Packard Bell BV,
said to be the fourth-largest PC vendor in Europe with which Lenovo has
been in acquisition talks in the past few weeks.

If Acer's deal with Gateway goes through, the Taiwanese PC maker will
become the world's third-largest player replacing Lenovo, according to
figures from data provider IDC.

"The acquisition deal with Gateway is a strategic decision that will help
Acer to reinforce its business in Europe and the US," J.T. Wang, chairman
of Acer, told the local media.

He said that after the company's acquisition of Gateway, the new Acer's
annual shipment will surpass 20 million while revenue will reach US$15
billion.

Although a deal between Acer and Gateway will hinder Lenovo's designs on
Packard Bell, Lenovo said it remains interested in acquiring the European
PC vendor.

"We are still in talks with Packard Bell and are still interested in
taking them over," said Zhu Guang, Lenovo's spokesman, who refused to
comment on the agreement between Acer and Gateway.

Lenovo has risen to the No 3 position in the world PC market by taking
over IBM's PC arm for US$1.75 billion two years ago. Its third position
was lost to Acer for a short time in the first quarter but Lenovo soon
regained its position in the second quarter on the back of its rapid
business growth.

But the sales volume gap between the two companies is still narrow. The
total shipment of Lenovo and Acer in the second quarter reached 4.8
million and 4.3 million respectively, according to IDC.

Witnessing a declining profit margin, the world PC market has entered a
consolidation stage, with larger manufacturers striving to gobble up
smaller ones to establish advantages of scale.

Earlier this month, Gateway reached a deal with Digital China, an IT
product distributor, to sell its PCs in the country.

(For more biz stories, please visit Industry Updates)

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