Gateway Inc. has the look of prey in the consolidating personal computer industry.
Picking a potential merger or acquisition target in any sector is a bold strategy. But International Business Machines Corp.'s $1.25 billion sale of its PC business to China's Lenovo Group Ltd. suggests that more deals may hold the key to further profit growth in this commoditized industry. Experts think 2005 will be a tough year for PC sales.
Gateway is the third-largest PC maker in the United States by units sold and is starting to recover from a rough few years of declining sales and losses. Its brand remains strong -- New York consultant Brand Keys Inc. rates Gateway's customer loyalty in such company as Hewlett-Packard Co. and IBM -- at a time when some Asian PC makers are looking to mesh their manufacturing muscle with tried-and-true U.S. brands.
Detractors say Gateway's stock is too pricey for a takeover now that it's back in the black, but others think a buyer could still find some savings in the business. In short, in a market where there are so many personal computers, Gateway's PCs could become cheaper yet.
Industry experts think the three most likely bidders for Gateway are Taiwan's Acer Inc., Lenovo and South Korea's Samsung Corp.
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