Like Gateway Inc. needed this.
China’s Lenovo Group Ltd. in February unveiled a push into Irvine-based Gateway’s sweet spot: consumers and small businesses.
The news comes a few weeks after Gateway announced a disappointing fourth quarter as direct and business sales floundered.
A week after the results, the chief executive responsible for Gateway’s return to profits last year, Wayne Inouye, stepped down.
Inouye’s inability to drive sales beyond big retailers pushed the board to end his reign at the once heralded computer maker, according to analysts. No word yet on a replacement.
Lenovo got into Gateway’s turf with its buy of IBM Corp.’s computer business last year. Big Blue, true to its corporate background, didn’t want to expand its struggling computer business.
Lenovo wants its piece of the already crowded market for consumers and small businesses. It launched a desktop that starts at $349 and a laptop at $599.
Prices like that make it a player.
Lenovo’s U.S. expansion comes on the heels of a big push by Taiwanese computer maker Acer Inc.
Acer already holds the No. 1 spot for laptop computer sales in Europe and has seen its worldwide share increase by 3.5 percentage points in the past five quarters.
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Lenovo PC: models start at $349 |
The company is expected to make another run at the U.S. market this year. Acer could grow its business here by 60% to 70%, albeit from a low starting point.
Worries about competition from Acer drove Goldman Sachs Group Inc. analyst David Bailey to downgrade Gateway’s stock from “in-line” to “underweight.”
“The company does not have a meaningful product cycle to differentiate it from its main competitors nor do we expect any meaningful expansion in its retail presence,” Bailey said. “Acer’s renewed push into the U.S. retail and (small business) segment poses the most significant threat to Gateway.”
Meanwhile, it’s not as if PC leaders Hewlett-Packard Co. or Dell Inc. are going to sleep.
One other note on Lenovo and Gateway: A potential replacement for Inouye could be Stephen Ward, the IBM executive who became chief executive of Lenovo in 2004. He stepped down in December and was replaced by William Amelio, one of Dell’s senior executives for Asia.
Taking Notice of Netifice
Here’s a company you might want to keep an eye on: Costa Mesa-based Netifice Communications Inc.
The company, which specializes in rolling out virtual private networks that connect various company locations, recently acquired rival MegaPath Networks Inc. of Pleasanton.
The deal stands to push sales to around $125 million this year.
In connection with the deal, Netifice raised $35 million in funding, pushing its total to about $120 million in funding during the past few years.
That’s some big bucks. Investors undoubtedly will be looking for some kind of payoff.
Craig Young, chairman and chief executive of Netifice, said the company could go for an initial public offering or some kind of buyout in the next few years.
“In the next 24 months or so, we’ll be looking at what our options are,” Young said. “We want to build the company to get it to half a billion dollars. We’ll probably do that through acquisitions that possibly could take an IPO down the road.”
As is typical with these things, Young didn’t want to be too specific on any intentions.
“You never know what’s going to happen,” he said.
The latest acquisition creates a major industry player, which goes up against big names such as AT & T; Inc. and MCI, now part of Verizon Communications Inc.
Netifice has grown in the face of competition from big telcos. Customers include McDonald’s Corp., General Motors Corp. and IHOP Corp.
The company has more flexibility in the types of network technologies it can offer, according to Young.
Netifice gets a few things with MegaPath.
More of MegaPath’s customers are small to midsize businesses. Also, MegaPath has security products that should help expand sales. An added bonus: MegaPath boosts Netifice’s outside agent sales. Almost all of Netifice’s revenue comes from direct sales.
Young was stingy with revenue details. But he said his company’s sales last year were around $45 million.
The company employs about 100 people at its office in Costa Mesa.
