Canadian analysts assess Acer-Gateway potential

Taiwan-based Acer Inc.’s announcement Monday of its acquisition of Gateway Inc. might give the Irvine, Calif.-based computer hardware company opportunity to make a second attempt at the Canadian enterprise space, but only if it plays its cards right.

Computer retailer Acer will buy Gateway for approximately US$710 million. The deal has been approved by both companies’ boards of directors, with government approval still pending.

Gateway could make inroads in the corporate market, however, it should first take advantage of the name it has established in the U.S. space around consumer products, said Michelle Warren, senior research analyst with Info-Tech Research Group. “And then work its way through the corporate space through small and medium business verticals.”

Warren further suggested that Gateway could even first establish that corporate brand in a country, say the United Kingdom, where the audience will have no “preconceived notions about the brand.”

Gateway Canada, in 1999, had made an attempt to penetrate the corporate space through distribution arms and some retail stores, however, with limited success.

Warren does foresee the company encountering a tough time in Canada given it would go up against large, established names, like HP, Dell, Lenovo, Toshiba, and even Acer.

“If the Gateway brand could be distinguished as being a higher value product of more robust price, yes, they would have a chance in Canada, but they’re going up against HP, Dell, Lenovo, Toshiba. And I think that’ll be really stiff for them,” said Warren.

Canada’s geography, too, would be a hindrance. Gateway would have to choose key retail locations to target that corporate market, said Warren.

She suggested Gateway could piggy-back on Acer’s established brand name and robust reseller channel. “For Gateway to come into Canada and try to get into the corporate market, they need Acer’s reseller contacts in order to make that happen.”

Despite this, Warren doesn’t see Gateway establishing the credibility with enterprises as have HP and Dell, unless a lot of capital was put into the channel model. “It would be very costly to buy their way into number three.”

Besides, she added, enterprise customers in Canada are “brand happy” with Lenovo and Toshiba.

The acquisition likely won’t give Gateway clout in the Canadian enterprise space anytime soon, agreed Eddie Chan, research analyst for mobile and personal computing and technology with Toronto, Ont.-based analyst firm IDC Canada.

Besides an increased Canadian presence for Gateway, said Chan, the net benefit from this acquisition is market share gained in the U.S. market.

The “growth engine in the PC market has been consumer”, according to Chan – and besides, Canada is mid market heavy and although the enterprise space is “large in terms of the number of seats, the number of organizations is relatively small.”

The decision to acquire Gateway could also mean Acer will buy Packard Bell in the next six months or so – a move that will have little impact on the Canadian market as Packard Bell operates in Western Europe, said Warren.

The main challenge facing Acer, she said, will be to integrate both Gateway and Packard Bell given differing corporate cultures. If done well, Acer will benefit from a “stronger footprint worldwide” and will have “a tremendous amount of buying power on the component level and on the design side out of Asia.”

Packard Bell, she added, will gain strength in the European market and possibly beyond.

“Unless that’s integrated successfully, the whole thing could fall apart,” said Warren.

Chan agreed that the acquisition of Packard Bell will have no bearing on the North American market. On the whole, he said, although Acer is already operating efficiently, it may still realize some savings.

Chan is interested to see how Acer will preserve the Gateway and eMachines brands moving forward “because there is some confusion currently with Acers’ branding strategy. There is really no delineation between a consumer and a commercial brand. They will be making efforts to distinguish them moving forward.”