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MPC pays $90M for Gateway business unit

Posted: 07 Sep 2007 ?? ?Print Version ?Bookmark and Share

Keywords:Gateway business unit? MPC acquisition? PC vendors?

Gateway Inc. announced it has agreed to sell its professional business division to MPC Corp. for approximately $90 million, concluding one of two major outstanding transactions ahead of plans by Taiwan's Acer Inc. to buy the troubled PC vendor.

U.S.-based Gateway still has to conclude plans to exercise its rights to buy European PC vendor Packard-Bell B.V. That deal has been cited by Acer executives as one of the main reasons behind their $710 million offer for Gateway.

Gateway has been reorganizing its operations to boost sales and improve profitability before striking the deal with Acer, which is in turn trying to increase sales in North America and Europe.

The sale of Gateway's professional business unit would further help reduce Gateway's selling, general and administrative costs by between $130 million and $150 million annually, the company said.

"While our performance in the highly competitive professional segment has improved, we believe a more focused approach on the largest segment of our business is in the best interest of investors and consumers alike," said Ed Coleman, CEO of Gateway, in a statement.

The professional business unit recorded revenue of $900 million in 2006 and $75 million in gross margin over the last four quarters. The unit sells computer products to businesses, government agencies and educational institutions.

The companies said employees of the Gateway division based in North Sioux City, South Dakota will transition to MPC, which said it expects to migrate the product brand name within one year.

Following the acquisition, MPC "will have the scale to enable it to compete better against larger rivals in the PC industry," said John P. Yeros, chairman and CEO of MPC. "In addition, our customers will gain access to a wider range of PC products and services and continue to enjoy high-quality, U.S.-based service and support."

The terms of the transaction calls for MPC to assume responsibility for about $60 million in operational and warranty services costs for the professional business unit. Gateway is also expected to invest about $10 million in MPC for a 20 percent stake in the Nampa, Idaho company.

- Bolaji Ojo
EE Times

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