Irvine’s Gateway Inc. is getting used to its new Taiwanese parent, No. 3 PC maker Acer Inc.
“There’s been a lot of back and forth,” Gateway Chief Executive Ed Coleman said. “It’s going to take some time.”
Coleman spoke at the kickoff event last week for a yearlong series hosted by the Paul Merage School of Business at the University of California, Irvine.
He reflected on the past year at Gateway marked by increasing speculation about a buyout, tough going in Gateway’s results, a laptop battery recall and job cuts.
“I joined a year ago September, really with the charter of bringing resolution to what had been an up and down period for the company for the past several years,” Coleman said. “Through the course of the year we have made good progress. Our cost structure is much improved. We improved our earnings and introduced exciting products.”
A big highlight for the company was introducing its PCs to Chinese consumers.
“They love U.S. brands,” Coleman said. “That business is taking off well. Acer, as a Taiwanese company, isn’t as beloved there.”
Last month, Acer closed on its buy of Gateway’s shares for $710 million. As a prelude to the deal, Gateway sold off its business selling computers to corporate customers for $90 million to Idaho’s MPC Corp.
The short-term focus for the company is “a smooth and effective integration,” Coleman said.
According to Coleman, Gateway workers, including about 500 in Irvine, are pondering questions such as, “Which process is going to take precedence?” “How is the organization going to be structured over time?” “What does it mean for me personally?”
“Part of the CEO’s job is to calm the waters,” he said.
The current mood at Gateway, as the nuts and bolts of the integration are being tackled, is “emotional,” Coleman said.
“Change creates emotion within an organization,” he said.
The company has been through a whirlwind of changes in its lifetime.
“Gateway itself has gone through many different business models, some for the good and some not, since it was founded in an Iowa farmhouse some 23 years ago,” Coleman said.
The company got its start in 1985 on the Sioux City, Iowa, family farm of founder Ted Waitt. Waitt started the company with a $10,000 loan and a borrowed computer.
Gateway, which later moved to North Sioux City, S.D., grew to be one of the largest PC makers with a quirky marketing motif that played off the company’s roots in the American Plains,hence the famed spotted cow logo.
By the late 1990s, the company was struggling to keep its place as Hewlett-Packard Co. and Dell Inc. came to dominate.
Gateway went public in 1997. In 1998, it moved to San Diego, Waitt’s adopted home. Three years later, it moved to the north San Diego County city of Poway.
In 2004, the company paid $266 million for Irvine’s eMachines Inc., a seller of discount PCs. In a twist, Wayne Inouye, eMachine’s turnaround chief executive, ended up running Gateway and brought the company to Orange County.
Inouye made gains by stressing sales through big electronics retailers. He was ousted in early 2006, after Gateway’s directors decided he wasn’t doing enough to bolster sales directly to businesses, schools and consumers.
Gateway was still reeling when Coleman came on board last year.
He sums it up: “This is an industry where change is almost violent.”
Acer is a good match for Gateway because the PC industry is one that “absolutely rewards scale,” he said.
Gateway paid an average of $7 more than HP and Dell for each Microsoft Corp. software license it bought, Coleman said.
“It’s a huge disadvantage from a cost of goods sold standpoint,” he said. “What Acer brings as the third-largest PC company is enormous scale.”
On the flip side, Gateway gives Acer a widely recognized brand name on which to ride into the U.S. consumer market.
One thing that won’t change, Coleman said, is Gateway’s “cow print” logo.
“The cow print absolutely stays. We are not going to get rid of that,” he said. “As for the extent of Acer’s influence on the Gateway brand, it’s really too soon to tell.”
Gateway is planning to do some research on its brand and what it means to consumers.
“What’s the statement we want to make with the brand? How does it appeal emotionally to the customer?” Coleman said.
Acer is planning to position the brand among its lineup of PCs, which now includes Acer, Gateway, eMachines and Packard Bell BV’s computers sold in Europe.
“Acer will operate like a consumer goods company, where it will target its brands to specific segments of the market,” Coleman said.
He likened it to Ford Motor Co., which owns the Jaguar, Land Rover and Mercury lines of autos.
“It’s moving to a ‘good, better, best’ model, like a car,” he said.
Meanwhile, Coleman said he’s looking forward to a period of stability under Acer’s wing. It’s still unclear how Gateway will be integrated into Acer’s operations.
“We don’t anticipate any major changes in Irvine,” he said.
When asked if he planned to stay on with Acer, Coleman said, “I’m here, aren’t I?”
