Acer takes on Lenovo with $710m Gateway buy

PC vendor Acer has agreed to acquire rival PC maker Gateway for $710m in cash.

The deal propells Acer to the number three spot in the ranking of largest PC vendors in the world. The combined firms sell more than 20 million PCs annually.

Acer has traditionally had a strong position in Europe, while Gateway focuses mainly on the US. Acer argued that the two firms complement each other rather than compete while entering new markets.

In related news, Gateway bought European PC vendor Packard Bell on Monday, which had been targeted by Lenovo.

Gateway thwarted Lenovo's acquisition by excersising a 'right of first refusal option' that allowed it to meet any third-party bid for the company.

The move will take what would have been a European retail opportunity for Lenovo and places it in the hands of its rival.

"[Lenovo] is most hurt by this. This deal would have given [Lenovo] a much bigger foothold in Europe," said Forrester Research principal analyst J P Gownder.

In the long term, however, Gownder said that Acer could set its sights on even bigger targets.

By acquiring a major player in the consumer and retail market, the firm is now able to address both business and consumer clients. That ability had, until now, been exclusively the domain of world's top two vendors, HP and Dell.