It was just three years ago that Gartner predicted there was a high probability (70%) that three of the top 10 PC brands in the world would disappear. A year later IBM sold its PC business to Lenovo. This August Lenovo appeared to be continuing the consolidation trend when it emerged that the Chinese manufacturer was in talks to buy Packard Bell.
Such a deal makes sense because it would give Lenovo a retail presence in European countries; the firm already has a strong consumer brand in China but is primarily a business brand in Europe. Early reports claimed Lenovo had trumped Acer on the Packard Bell deal because the Taiwanese company had made no secret of its plans to make an acquisition this year.
Fast forward two weeks or so to the announcement that Acer had agreed to pay $710 million to buy Gateway, the US manufacturer. This too is an interesting deal because it strengthened Acer’s presence in the North American market, especially the consumer space.
However, the Gateway story carries an intriguing sting in the tail. Back in 2004, when John Hui sold eMachines to Gateway, there were certain non-compete clauses contained in the agreement. When Hui bought Packard Bell from NEC last year, he renegotiated those clauses in exchange for giving Gateway first right of first refusal to buy the company if he decided to sell it.
When Acer agreed to take over Gateway, the US company decided – and remember this was more than two weeks after the Lenovo-Packard Bell announcement – to exercise its right to buy Packard Bell. Until that point, Gateway had made no public pronouncement on the Lenovo-Packard Bell deal at all.
Suddenly, what had at first appeared to be a masterstroke by Lenovo – one that would have boosted its consumer profile and confirmed its position as the third biggest PC vendor in the world – collapsed overnight.
Meanwhile, Acer found itself not only in possession of a strong US retail brand (and over 5% of the US PC market in the process) but also, by proxy, the future owner of the self-styled third largest retail brand in Europe. Pretty good business, especially as it is expected to propel Acer past Lenovo and into third place overall in the PC market.
Viewed from the outside, it’s impossible to escape the conclusion that Lenovo has been completely outmanoeuvred by Acer. It’s also hard to escape the suspicion that someone at Lenovo should have known about Gateway’s right of first refusal before making a bid for Packard Bell. Hui’s earlier involvement with Gateway, via the sale of eMachines, was well-documented.
Even if, somehow, no one at Lenovo had any idea of Gateway’s effective veto over any sale of Packard Bell, it must have been one of the first things that came up when the company went into deeper discussion with Hui. After all, it’s hardly something Hui would forget to mention. So what was Lenovo planning to do to make it go away? Launch a takeover bid for Gateway if the US company decided to exercise the right of refusal? Pay it to negotiate away the clause?
As for Acer, was it planning to acquire Gateway all along, rather than Packard Bell, because it knew of the right to refusal? There would not have been much point wasting time talking to Hui if Acer knew someone could come along at any time and derail the deal by getting Gateway to veto it. Ask Lenovo.
Admittedly, there will be some overlap for Acer with Gateway in US retail and in Europe with Packard Bell – more so than there would have been if Lenovo had bought Packard Bell – but the Taiwanese company probably thinks the rewards are well worth any short term difficulties.
As for Lenovo, it’s back to the drawing board. It’s hard to see where it can go next in terms of acquiring a PC vendor. The market is fairly well consolidated now around HP, Dell, Fujitsu Siemens, Toshiba, Acer, Lenovo and Apple. Whatever happens, it’s encouraging from a channel perspective that none of those companies is a purely direct vendor.
Subscribers 0
Fans 0
Followers 0
Followers