A lot was made of the Jan. 2001 news that Gateway
It's certainly an interesting move for Gateway, which will exchange 50 million shares of stock and $30 million in cash (about $266 million in total based on Friday's close) for the rights to privately held eMachines.
Gateway is in the process of dramatically changing its product mix to supply a range of consumer electronics, rather than just PCs and related items. The new direction in product offerings follows a year in which Gateway's revenues fell substantially; it turned in a third consecutive full-year net loss; and its PC unit sales fell 24% year over year.
The move gives Gateway the customer relationships of eMachines -- which are strong at the retail level. The strategic acquisition balances Gateway's forte in direct sale and provides the momentum improve its profile among consumers. More broadly, it reaffirms Gateway's commitment to the PC business in the face of a changing product line.
The "new Gateway's" leaders are optimistic about the combined company's ability to compete with Dell
Gateway -- which will add considerable scale given eMachines' $1.1 billion in 2003 sales -- is now pointing investors toward a return to profitability for 2005. Investors had already shown their willingness to support the company's latest moves for most of 2003 -- and from here the story gets even more interesting.
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Dave Marino-Nachison can be reached via email.