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Acer Move May Hurt Lenovo
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Acer's agreement to take over Gateway Inc may foil Lenovo's plan to acquire Packard Bell and will pose a real threat to the mainland company's status as the world's third-largest PC maker.

Acer said on Monday that it plans to acquire Gateway, the third-largest PC maker in the United States, for $710 million, at $1.90 per share. The company said the deal was approved unanimously by the boards of both Acer and Gateway and is expected to be sealed by December.

Gateway said it plans to exercise its right of first refusal to acquire all shares of PB Holding Company, the parent company of Packard Bell BV, said to be the fourth-largest PC vendor in Europe with which Lenovo has been in acquisition talks in the past few weeks.

If Acer's deal with Gateway goes through, the Taiwanese PC maker will become the world's third-largest player replacing Lenovo, according to figures from data provider IDC.

"The acquisition deal with Gateway is a strategic decision that will help Acer to reinforce its business in Europe and the US," J.T. Wang, chairman of Acer, told the local media.

He said that after the company's acquisition of Gateway, the new Acer's annual shipment will surpass 20 million while revenue will reach $15 billion.

Although a deal between Acer and Gateway will hinder Lenovo's designs on Packard Bell, Lenovo said it remains interested in acquiring the European PC vendor.

"We are still in talks with Packard Bell and are still interested in taking them over," said Zhu Guang, Lenovo's spokesman, who refused to comment on the agreement between Acer and Gateway.

Lenovo has risen to the No 3 position in the world PC market by taking over IBM's PC arm for $1.75 billion two years ago. Its third position was lost to Acer for a short time in the first quarter but Lenovo soon regained its position in the second quarter on the back of its rapid business growth.

But the sales volume gap between the two companies is still narrow. The total shipment of Lenovo and Acer in the second quarter reached 4.8 million and 4.3 million respectively, according to IDC.

Witnessing a declining profit margin, the world PC market has entered a consolidation stage, with larger manufacturers striving to gobble up smaller ones to establish advantages of scale.

Earlier this month, Gateway reached a deal with Digital China, an IT product distributor, to sell its PCs in the country.

(China Daily August 29 2007)

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