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Analysis: Acer-Gateway means 'end of Acer PCs'

What does Acer's purchase of Gateway mean?

Similarly, Baker doesn't expect PC feature-innovation to take a serious hit. If anything, the merger could help stimulate the combination of features on notebooks and desktops.

"Feature innovation is more likely to come from a desire to differentiate products, and that is as much about competing with what consumers already own versus what other brands are providing."

As for how consumers who've just purchased Gateway products will be affected - or how the acquisition will impact future Gateway product launches - remains to be seen. Details are few regarding the minutiae of melding these two companies. Gateway can say only that its immediate operations will not be affected.

Overlapping market shares

One thing that might change in the future: which brands you see where. Traditionally, manufacturers could distinguish brands by choosing which retail stores carried specific brands and configurations. Those lines are already blurred given the overlap in offerings between the pre-merger Acer and Gateway.

"Just yesterday I saw Acer notebooks sitting next to Gateway notebooks at a wholesale club," recalls IDC's Bell. "So it will be interesting to see how this merger plays out."

Bell's initial impressions are that Gateway, which has significant market share in the US, will remain the combined company's retail brand; meanwhile, Acer will target its eponymous brand at the commercial market, where Acer already sees volume sales.

The whole merger screams of Acer wanting to increase its retail presence in the US by gaining a company whose strengths complement Acer's weaknesses - and the merger with Gateway accomplishes exactly that.

"You're talking about two companies going in two different directions," says Bell.

"Acer's growth has been triple digit in the past three quarters, whereas Gateway has been in negative growth. This is Acer's way of establishing the company in the US market. Acer has been doing well in the small-medium business space, in particular, and lately, they have entered the retail space; but with the acquisition of Gateway, it will solidify a large market share for them in the US."

In the second quarter of 2007, IDC says that Gateway commanded 14 percent of the market share for consumer desktops, about double Acer's 7 percent. Those market positions flip-flop when you're talking about commercial desktops. There, Gateway has just 1 percent, while Acer has 4 percent.

Bell notes that Acer has had some recent success growing its market share in the US, in part by adding retail partners and resellers for both desktops and notebooks. Acer's push into the desktop space has been a relatively recent development, and one that NPD's Baker calls "opportunistic" where the company goes into it "for promotional products or when shelf space was available, as an alternative to a low-cost desktop from HP".

What deal means for Acer

IDC's Bell says that Acer currently remains focused on notebooks here in the US, but desktops have grown to between 20 and 25 percent of Acer's overall US business (by comparison, Gateway's desktop business represents about 55 percent of its total sales).

"In the last year, Acer's domestic desktop growth has tripled, but volume sales have not been high. In the second quarter of 2007, Acer's desktop sales put them in sixth, with 225,000 units sold, behind Apple and Lenovo," says Bell. By comparison, the top gun during this period was Dell (with over 2.8 million desktops sold), followed by HP and Gateway (which sold about 529,000 desktops).

It's possible that the merger will help jump-start sales for both brands. But it's more likely that Acer will use the merger to think about scales of economy for producing products.

"It will take time for them to figure out how to optimally use both brands," says Baker. "But for now both have specific segments they cover, and that isn't likely to change [with the merger]."

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