It's all over but the crying. Cow-spotted computer maker Gateway (NYSE:GTW) is wrapping up its troubled tenure as a stand-alone company, agreeing to be acquired by Taiwan's Acer in a $710 million deal that's more bitter than sweet.
Sure, cashing out at $1.90 a share represents a healthy 57% premium to where the stock closed on Friday. However, it's also a sad price tag for a company that blew it, big time. Gateway's balance sheet was flush with $1.2 billion in cash just five years ago.
Losses, restatements, namesake store closings, and the costly 2004 acquisition of eMachines weighed heavily on the company. Recent investors may be pumped to be taken out at a generous markup, but older investors have to be smarting. Gateway's going out for less than its liquidation value from a few years back.
This isn't the end for Gateway itself, of course. It may very well thrive as an Acer appendage. Acer expects the deal to be accretive to next year's bottom line. The corporate combination creates a company that's generating $15 billion in annual revenue, while shipping out more than 20 million computers a year. The deal won't make Acer as big as market leaders Hewlett-Packard (NYSE:HPQ) and Dell (NASDAQ:DELL), but it does firmly entrench the firm as the industry's bronze medalist.
As long as it's able to improve Gateway's operations, Acer's getting a good deal here. Since Gateway was clinging to $314 million in working capital at the end of June, Acer won't actually have to shell out the entire $710 million value of the deal.
Still, it's sad to see Gateway go. The company and its cow-spotted boxes felt so relevant in the 1990s, and Gateway deserves better. As bad as things may have gotten, it still managed to post a profit in all but two quarters over the past three years. It also lapped an important milestone in its last quarter, shipping out the 50 millionth PC in its storied history. With plenty of greenbacks still in its balance sheet, it didn't have to bow out. But it did.
Oh, well. There's no use crying over spilled milk. This heifer's gone to pasture.
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Longtime Fool contributor Rick Munarriz does have a pair of Gateways in his house, though he prefers his HP computer. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy is grass-fed and hormone-free.
