Gateway buys E-machines

http://story.news.yahoo.com/news?tmpl=story&cid=1093&e=1&u=/pcworld/20040130/tc_pcworld/114533

Gateway plans to acquire EMachines for about $200 million to bolster its shrinking PC revenue while it pursues the consumer electronics market, the companies announced Friday.

The deal will provide Gateway with the revenue generated by EMachines’ strength among consumers in retail channels, the companies say. EMachines sells low-cost PCs that have made inroads with U.S. consumers, who purchased enough PCs from the company to lift it into fourth place ahead of Gateway in the fourth quarter, according to market research from IDC.

First reaction: Yecccch!! It’s a short term cash flow decision but in the long term, purchasing more PC capacity seems dumb.

the interesting thing to me is that lately emachines has started to go after the higher end market. Witness their introduction of a 64 bit nothebook and and desktop. Have to wonder if their long term plan for gateway is to get out of the pc market and purely into consumer electronics, which has done pretty well for them.

Not sure why anybody would stay invested in them. They just seem like a slowly dying company that is going to eventually get squezzed out or bought real cheap by someone in a few years. They just announced another loss of like 100+ million. Nothing they try seems to work.

I wouldn’t call this a capacity move, its a quality move. Emachines are better computers than Gateways. My guess is they want to save the Gateway name for brand loyalty reasons… throw it on some Emachines (the same reason that computers with the Compaq name still exist over 2 years after their acquisition by HP). Maybe they’ll even be able to fix the recurring power button problem.

The valuable thing Gateway did was to be at the forefront of the Friendly Movement… Pastoral Peace with the Comforting Cow. Unfortunately their management has used a manipulative and most definitely unfriendly sales strategy which hurts sales, customer relations, and worker morale. Things went downhill from there.

What I don’t understand is whether Gateway knows what its problems are. Simply buying a manufacturing upgrade doesn’t solve the root problems of the company.

I’d rather the buyout had gone the other way around. Emachines management is far more competent.

By the way… Emachines has targeted the high end for a few years now… nothing new there. The 64-bit processor is the first opportunity for Emachines to really break into the high end, however, since its the first time the AMD chip has gained a substantial advantage over Intel. AMD and Emachines have a great relationship… AMD owes a lot of its success to Emachines… the pressure generated by their effective mutual quality caused HP to submit to AMD.

The Emachines reward? A window of retail exclusitivity for the 64-bit chip. The patting of the back has come full circle.

Brian, E-machines are crappier than Gateways. I’ve worked on plenty of both to know.

I remember Gateways being decent back around 1990 or so; several professors of mine had them. They declined as they attempted to broaden their market share.

These days, who’s making money out of PCs? Dell, a few specialists like Alienware who can market to suck^H^H^H^H enthusiasts, and whitebox makers with low margins?