For Gateway (NYSE:GTW), it's got to be a bittersweet share repurchase. Closing on a $315 million deal last night that has the computer maker buying back Time Warner's (NYSE:TWX) stake in the company hurts as much as it makes perfect sense. Gateway's got the money to spend. Time Warner's AOL subsidiary, which brokered the deal, can use the money. But, as Rich Duprey pointed out last month, this agreement was simply the embarrassing love child of a deal to revolutionize the nation with Internet appliances that got tripped up as soon as the starter's pistol went off.
Gateway heads into the new year next week in good shape, now with even fewer shares outstanding. Last week it raised its fiscal fourth-quarter targets, and now with its eMachines acquisition, the company will have been transformed from a direct seller with its own costly storefronts into a company moving its systems through consumer electronics giants like Best Buy (NYSE:BBY) and Circuit City (NYSE:CC).
No one is saying that Dell (NASDAQ:DELL) or Hewlett-Packard (NYSE:HPQ) are feeling Gateway's breath against their necks as Gateway approaches. Gateway is too far behind the two market leaders. However, for a company that just a couple of years ago was selling for less than the cash on its balance sheet, it's been a welcome transformation into a profitable company that matters.
Yes, it's unfortunate that AOL and Gateway didn't usher in a new era in wired convenience. It would have been interesting to see how that would have played itself out. But with AOL bleeding subscribers and recent layoffs providing little reason to expect users to come back, the new and improved Gateway is better off as a free agent.
Will you be more willing to buy a Gateway-branded machine at a retail chain than directly through Gateway? Do you need to upgrade your computer or can its shortcomings be corrected? All this and more -- in the Help with this STUPID Computer! discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz has a pair of low-end Gateway computers in the house, but he toils away on his HP computer and Dell monitor. He does not own shares in any of the companies mentioned in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
