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Gateway shareholders express their outrage over the $710 million USD Acer acquisition

Acer made a surprise move in late August when it announced its intentions to purchase U.S.-based Gateway, Inc. The deal was valued at $710 million USD and was crucial in helping Acer get a stranglehold on the U.S. market. Gateway is currently the fourth largest PC manufacturer in the U.S., while Acer is the third largest PC manufacturer in the world.

"The acquisition of Gateway and its strong brand immediately completes Acer's global footprint, by strengthening our US presence," said Acer chairman J.T. Wang at the time of the announcement.

"Acer has made impressive strides in the global PC market and the board and I welcome this merger," added Gateway CEO Ed Coleman.

All is not roses, however, when it comes to the merger. Shareholders in two separate lawsuits are claiming that Gateway was worth well more than the $710 million USD price tag that was agreed upon. The shareholders note that Gateway had a fiduciary responsibility to its shareholders and was not putting its shareholders interests in mind when it agreed to the acquisition.

"The Company’s directors breached their fiduciary duties to stockholders by approving the Merger Agreement and the transactions contemplated thereby, including but not limited to the Offer, and claims that these transactions are both unfair and coercive to the public stockholders in a sale of the Company," the lawsuit claims.

The lawsuit goes even further to indicate that "The Company’s directors breached their fiduciary duties by failing to include certain information in the Schedule 14D-9, which purportedly denies the stockholders a fully informed voluntary choice whether to approve the Merger Agreement or seek appraisal."

It is not known what price shareholders would have been content with concerning the Gateway purchase, but John Hui offered just $450 million USD for Gateway's retail division in August 2006. Gateway rejected the offer.

Wang Jen-tang, Acer's chairman and CEO, has even noted that its investors and some market analysts indicated that the $710 million price tag may have been too much. "Regarding the criticism that the price is too high, I think whether a price is high depends on whether the buyer will in the end be able to realize synergies," said Jen-tang to the Financial Times. "If he is able to do that, then it is not high. If he can't realize the synergies, then it's a very high price."

Shareholders may also be smarting over Gateway's priority position when it comes to Packard Bell. Gateway has the right of first refusal (ROFR) for complete control of PB Holding Company, -- thus gaining complete control of Packard Bell. Gateway acquired the ROFR in June 2006 from Hui.

Jen-tang plans to exercise the right and is already discussing Acer's plans for Packard Bell.

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Gateway still exists?
By BMFPitt on 9/13/2007 11:00:36 AM , Rating: 3
I haven't seen a cow box in at least 5 years...

RE: Gateway still exists?
By Master Kenobi on 9/13/2007 11:18:48 AM , Rating: 1
They are a budget brand at Best Buy and the Sams Club/BJ/Costco's.

RE: Gateway still exists?
By mmeytin on 9/13/2007 11:56:34 AM , Rating: 5
That is not entirely true. eMachines is a budget brand owned by Gateway. Gateway branded boxes are not budget machines - they are positioned as mid- to upper-market alternatives to traditional sellers like Dell or HP. They do have several valuable innovations in their portfolio, including successful line of Tablet PCs, one of the pioneers in using BTX cases, one of the first major companies to offer factory overclocked machines with full manufacturer warranty. That fact that all this is not widely known is a testament to their failure to properly market their products.

RE: Gateway still exists?
By Seemonkeyscanfly on 9/13/07, Rating: -1
RE: Gateway still exists?
By OrSin on 9/13/2007 1:19:16 PM , Rating: 3
Emachines base line is the exact same as dell. There is no suck thing as old technogoly anymore. As far as quailty most OEM budget line are about the same. You get what you pay for. Then again thier upper line is over rebadged stuff from thier budget line so it not much better. If your not buying a workstation or building a custom gaming rig, then they are really all the same.

RE: Gateway still exists?
By leexgx on 9/13/2007 1:50:46 PM , Rating: 2
Emachines pcs have allways been cheap pcs ()in the way thay was made as well but at least thay came with an good recovery disks

Gatway pcs Use Good parts in there pcs and are as such make mid to high end pcs (every gateway pc i see was good and use norm parts that are User upgradeable as well try and get that from an dell pc)

RE: Gateway still exists?
By Seemonkeyscanfly on 9/13/07, Rating: -1
RE: Gateway still exists?
By StevoLincolnite on 9/13/2007 3:32:13 PM , Rating: 2
There is no suck thing as old technology anymore.

He speaks the truth, as they say one mans trash is another mans treasure.

And just because something is "Old" does not make it useless.
Those cheap budget machines you buy in supermarkets are plenty powerful enough for your Email+Internet+Popcap/Gamehouse games, plus Microsoft Office.
In-fact I do the same thing on a Pentium 3 450, 256mb of ram and a Geforce 2 MX200.

Well we don't have Walmart in Australia that I know of, but we do Have Kmart machines, and they have a VIA C3 2000+ processor in them, remember they sell them as budget machines, and because of that you will not get the high end equipment, but for some people, its far more than enough horsepower.

there is no real new technology; they are still getting rid of the old items first.

And some people wont use all the new technology, it just goes to waste, I wont use 64bit goodness for a long time, so why should I upgrade to a 64bit processor?
I don't download or install many games, is it necessary to have more than a 40gb HDD?
Do I need AGP/PCI-E card when the on-board Intel card does everything?

People laughed at Intel back in the day when they released the Celeron A, Intel had a vision of budget computers for under a grand, now they are here and now everyone complains about lack-lusture performance or there isn't enough functionality etc.
You pay for what you get.

RE: Gateway still exists?
By Seemonkeyscanfly on 9/13/07, Rating: -1
RE: Gateway still exists?
By Targon on 9/14/2007 4:02:56 AM , Rating: 2
Pretty much every processor is 64 bit enabled these days, even if most people don't realize it. The only exceptions might be some low end Intel machines or the clearance specials from years ago. Every K8 AMD processor is 64 bit for example.

Now, if a machine comes with Vista, that is it's own problem because you will really want more system memory in the machine just because the OS is a bit bloated. If you can find a machine with XP pre-installed instead of Vista, then yea, a cheap budget machine will work, but Vista on less than 2 gigs of memory is really going to drive most people crazy due to the pauses caused by virtual memory. That's the problem with budget these days.

Budget processing is fine, but if the OS sucks up too much of the memory in a machine, it will feel sluggish.

As for disk space, a LOT of the space taken up is from pre-installed stuff. Also, applications like Microsoft Office take a LOT more room than they probably should. 40 gigs SHOULD be enough, but games are not the only things that can quickly fill up a hard drive.

RE: Gateway still exists?
By HotdogIT on 9/13/2007 10:09:05 PM , Rating: 3
The CPU on the PC I run at home (build with beta parts) will still not be available to the market place for about another 18 months. Yes, nothing in the market place will touch it unless you spend around $7,000.00.

You tried really, really hard to lie in your post, and I commend you for that.

1) Your CPU is so good, nothing on the market can touch it... unless you spend 7k. On a CPU. To beat a CPU you claim to be using. So what CPU can I buy, for 7k, that would beat it?

2) You're "in the channel". "In the channel." I can promise you you're not in any channel, Intel or AMD. I can guarantee that.

However, in your world there is no real new technology….Hmmmm did you ever think that maybe there is new technology you’re just not buying it?

Well no shit. Of course there are newer items being used and tested. I just highly doubt some semi-literate retard is using them and posting on a forum about using them.

you believe they have the best stuff or the same stuff as everyone else because they told you they do.

As in, they have the best stuff currently on the market, since all parts are created equal (ie, a Q6600 from HP is going to be the same physical part as a Q6600 from Dell?)? Then yes. We never claimed to be using the most recent beta parts, mostly since we don't suffer from compulsive lying on a message board.

but remember they were buying for the larger volume of sales; the manufacture was/is building to fill what should be double the volume. This leaves a lot of parts just sitting around getting old. Where do you think those parts are going to go?? If you answered, in their systems you’d be correct.

My brain just cried a little bit. If you're claiming this is why there are still Pentium D boxes on the market; well no duh. But it's not like they're relabeling Pentium Ds as C2Ds and selling them to people; you KNOW (whether you understand the differences or not) what you're getting.

If you buy from them then yes, there is no real new technology; they are still getting rid of the old items first. It is very hard for a large company to keep up with new technology, it always has been and it always will be.

But there in lies the problem: Even the "high end" shops such as Velocity Micro, Falcon NW, etc, etc are using the SAME PARTS. If there was a company building and selling Nehalem-based systems, you can bet SOMEONE would be buying them.

I honestly don't know what your entire post was focusing on: Were you honestly thinking we thought progress had been totally stopped on the technology front? The original quote you quoted, "there is no suck <sic> thing as old technology anymore" is partially accurate: If you go to Dell's site, or HP's site, most of their product line is now based around the current technology of the time: C2D and X2. Just as every OEM.

And now, since I'm really looking to be downrated, here's but a small sampling of your spelling mistakes. The corrections are in bold.

Wow when did we enter the time freeze vortex?

I say, dear gents, when did we enter a time freeze VORTEX?

The CPU on the PC I run at home (build with beta parts) will still not be available to the market place for about another 18 months.

Hah! Dear friends, the CPU I run at home, built with BETA parts mind you, will still not be available to the market place for... oh, I'd say another 18 months or so! Evil laughter track!

Yes, nothing in the market place will touch it unless you spend around $7,000.00. No, I did not pay that, I’m in the channel, I beta test items, no I can not give out details and yes it’s nice to see tomorrow’s technology today.

No sirre-Bob, nothing will touch my 409!, unless of course you spend... oh, 7 THOUSAND AMERICAN DOLLARS! And of course I didn't pay that... I'm in the CHANNEL! *Pause for dramatic response from crowd* That's right folks... the CHANNEL! I went to an Intel Channel Conference once, since I won the drawing at Best Buy!

The main reason it’s fast is that it has only new technology parts.

I'm a fucking retard and should be castrated, so my seed will never be able to spawn more of me!

And... fin!

RE: Gateway still exists?
By Ryanman on 9/16/07, Rating: 0
RE: Gateway still exists?
By phaxmohdem on 9/14/2007 8:03:29 PM , Rating: 3
The CPU on the PC I run at home (build with beta parts) will still not be available to the market place for about another 18 months.

So you're running a Phenom CPU? ;)

RE: Gateway still exists?
By Myrandex on 9/13/2007 3:24:33 PM , Rating: 2
I would say you are a little off with your statement about emachines.

The emachines M680x line of laptops were superb. Mine was built like a tank (6805, first of its species). I have liked it more than any dell, HP, previous gateway, Acer (I have actually worked on two), compaq, etc. The specs were great at that time, and the price couldn't be beat as well (it wasn't a $600 cheap as can be laptop, but for what came in it, it was cheaper than the competition). The laptops specs at that time:
Athlon64 3000+
512MB DDR333
80GB Hard Drive
ATI Radeon 9600 64MB Discreet Video!!!
15.4" Widescreen
Excellent mouse touchpad
802.11G wireless (with LEAP support!!! this let me work at my university)

RE: Gateway still exists?
By Samus on 9/14/2007 3:56:53 AM , Rating: 2
Gateway has decent $600 notebooks, that's about all. Acer, however, makes some great business machines...still some of the only PC's you can find with WindowsXP Pro still on them. I don't think much of Acer's laptop's though, kinda cheap and low quality feeling.

Basically I think Acer makes great PCs and IBM makes great notebooks. Honestly, I don't know why anyone would buy something other than an IBM notebook considering how awesome the T and X series' are.

RE: Gateway still exists?
By michaelheath on 9/13/2007 3:14:24 PM , Rating: 2
Well, for those who don't remember, Gateway used to have store locations up until about 5 years ago when they decided to submerge into the depths of exclusive online sales only.

The fact that Gateway is still 4th in global sales shouldn't be surprising, seeing as how I didn't even know Acer was the 3rd largest manufacturer (I've seen one person using an Acer laptop in the past year here in the U.S., and the young lady who owned it purchased it in Italy), and Apple is 5th (I see Apple laptops all over the place).

While the eMachines sales and budget Gateway brand machines is probably their bread & butter income, Gateway as a company has had a wide variety machines for sale, including gaming machines. Maximum PC and [H]ardOCP have both reviewed the FX gaming series, and [H] in particular was somewhat fond of their tech support.

I guess I'm just saying, "Just because you haven't seen them all over the place doesn't mean they fell off the face of the earth and they're no good, for it seems that, apparently, quite the opposite is true."

With that in mind, I am rather surprised that Acer and Gateway directors both thought that the company was only worth $710 mil. Being the 4th largest computer supplier is no small feat, unless the company has been hemorrhaging profits all along to get to that figure, but I don't think that's true since their past few quarterly earnings seem to show profit.

RE: Gateway still exists?
By 1078feba on 9/13/2007 4:45:36 PM , Rating: 3
I recall posting along similar lines when this site posted the original article about the proposed buyout a few weeks back. I was politely told that I was wrong, and that Gateway wasn't worth anymore than what Acer was paying for it.

Maybe all that money spent on my International Finance/German degree wasn't wasted after all...:)

RE: Gateway still exists?
By MADAOO7 on 9/13/2007 8:52:15 PM , Rating: 2
ateway is still 4th in global sales shouldn't be surprising

What's surprising is you didn't read the article correctly. Gateway is 4th in the US , not globally. Acer is a much larger company with an absolutely massive global presence, especially in Asia and Europe. I say this as a proud American, but Americans commonly forget we aren't the only country in the world. We are but just a small part of the larger global economy. Just because Acer isn't a household name in the US (although it has always been in mine.... thank you $300 4x CD-R drive) doesn't mean it doesn't exist everywhere else.

RE: Gateway still exists?
By mindless1 on 9/15/2007 3:48:01 AM , Rating: 2
Yes, Acer has a far larger global market, however it does not diminish Gateway's name/value. I own an Acer laptop and yet, for the small overhead Gateway charges, have not found Gateway systems to be substandard in any way.

I think Gateway's primary problem was predicting the market, that people don't value a "country store" as much as low price and service be damned (until the customer whines about lack of service later, LOL) (at least not in this century).

Let's be frank, Gateway was targeting first-generation PC owners, your parents or grandparents (depending on how old you are), and they are a dwindiling population. Today's young adult, first PC purchase customers are looking for lower price,, eliminating the middleman, more than supposed GW naamesake or support.

RE: Gateway still exists?
By encryptkeeper on 9/14/2007 9:10:57 AM , Rating: 2
Jen-tang plans to exercise the right and is already discussing Acer's plans for Packard Bell.

Packard Bell still exists???

RE: Gateway still exists?
By SandmanWN on 9/14/2007 10:31:42 AM , Rating: 2
They left the US market long ago to focus on Europe. They've been there since then.

RE: Gateway still exists?
By squirrelfriend on 9/14/2007 1:40:34 PM , Rating: 1
Maybe its because i live in Minnesota. but i see the things everywhere. we have ton of best buys (i drive by their corporate HQ once and a while) and gateway had some local stores in the Twin Cities.

I also worked at a local tech shop for 2 years and saw them close to as much as i saw dells for various reasons.

in fact a few months ago maximum PC had a bunch of companies submit the best gaming rig they could for 2,500... Gateway entered and got somewhere around a 2 out of 10 rating (followed closely by alienware...buhahaha)

also so a review in Game Informer magazine for what i think was the same PC and they gave it a 9/10. granted these are people that focus on the games and don't know shit about hardware i can give them a little lean room. but man did that make me sad.

gateway can focus on high end with high price points but it still offers low quality rigs. innovation for the mainstream maaaaybe. but industry innovating? F that noise.

in conclusion. i see them a ton (brand new). i live in Minnesota.

RE: Gateway still exists?
By SiliconAddict on 9/16/2007 2:17:29 AM , Rating: 2
I lost faith in Gateway when I opened a box and found a Cheetos bag in it. This was direct from Gateway. I mean really. WTF?

Remember the days...
By JSK on 9/13/2007 1:33:37 PM , Rating: 2
When Gateway and Dell were uttered in the same sentence?

Oh how the times change.

RE: Remember the days...
By acer905 on 9/13/2007 1:52:44 PM , Rating: 4
Ahh, yes. i remember it now "Dude, why did you get a gateway? Seriously don't you know that the only thing worse than a Dell is a Gateway. What?!? You got one with a celeron??? Remind me to laugh at you when that thing blows up"

Can't be that bad a deal
By jak3676 on 9/13/2007 11:00:24 AM , Rating: 4
I'm sure stock holders are probably upset that Gatway's stock price has only plummited in recent years, but Acer did offer conciderably more than the stock price at the time of the offer. It was hovering around $1.25 per share before Acer stepped in, now its about $1.85. That's no where near the price of the stock this past spring or in years past, but that's business. Your company is only worth what you can sell it for at the moment - not what it was months or years ago.

By damncrackmonkey on 9/13/2007 10:26:48 PM , Rating: 1
I wonder if the stockholders would quit bitching if Acer offered to retroactively buy their shares from them...

"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng's take on patent troll Soverain
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