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Gateway: From PC powerhouse to buyout bargain
Written by Daniel   
Tuesday, 28 August 2007 12:12

Gateway: From PC powerhouse to buyout bargain
By Erica Ogg
Staff Writer, CNET
Published: August 27, 2007, 6:35 PM PDT

News analysis Taiwan is a long way from Iowa.
But not as long as the distance that Gateway--the farm-raised, direct-sales PC company that grew into a major force in the U.S. computer industry--has traveled over the past two decades.

When Acer agreed on Monday to purchase the American PC maker, it wasn't shocking, since more than a few pundits would say Gateway's acquisition has been several years overdue. But at a $710 million purchase price, it's a comedown for a company that in 1997 was offered $7 billion to become part of Compaq Computer (which was eventually acquired by Hewlett-Packard).

A string of bad quarters, a revolving door into the chief executive's office and a schizophrenic business strategy have all led to Gateway's end as an independent company after 22 years in business.

The economic downturn that began in 2000 hit Gateway particularly hard, and it never quite recovered. Its identity as a company was constantly in flux after that, expanding through retail stores, delving in the world of consumer electronics, and acquiring low-end PC maker eMachines. But none of the new strategies quite worked.

Now it will be up to Acer, a Taiwanese company, to resuscitate Gateway's heartland image and compete with the PC industry's dueling giants, HP and Dell.

To people who've watched Gateway's aimless adventures of the last few years, the new and focused management that will be at the helm is probably a good thing, and a long time coming. "Gateway's basically been up on eBay for the last couple years," said Samir Bhavnani, analyst at Current Analysis.

Founded in 1985, the company was built on a direct-sales model--a la Dell--which was initially very successful. Gateway grew 20 percent to 30 percent from quarter to quarter at its peak in the 1990s, making it the Acer of its day--the fastest-growing PC maker at the time.... More

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