Gateway makes bid for rival eMachines

Gateway plans to acquire rival eMachines in a bid to regain its footing in the PC game and broaden the distribution of its Gateway-branded consumer-electronics devices at retail.

The Poway, Calif., company plans to purchase privately held eMachines for $30 million in cash and 50 million shares of stock. Based on Gateway's closing price of $4.09 per share Thursday, the total value of the deal would be approximately $234.5 million. The companies' combined PC businesses would constitute the third-largest PC manufacturer in the United States, Gateway said, and rank it eighth in the world. The deal is subject to regulatory approval, and is expected to close in six to eight weeks.

By making a bid for eMachines, Gateway is hoping to combine the best of two worlds, creating a much larger PC business and giving itself additional sales channels for consumer electronics, such as its Gateway televisions, both inside and outside the United States. The move could allow Gateway to double its annual PC volume from about 2 million to about 4 million units, and position itself as a "very strong No. 3" to Hewlett-Packard and Dell, Ted Waitt, Gateway's CEO, told CNET News.com in an interview Friday.

News source: C|Net News.com

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