Traders punish Acer for Gateway purchase

Shares of Acer Inc. opened down by their daily limit on the Taiwan Stock Exchange early Tuesday, as investors took a dim view of its decision to buy U.S. PC vendor Gateway Inc.

Acer stock opened down almost seven per cent, at $1.79 (U.S.), the lower limit imposed by trading rules on the local stock exchange, and wallowed around that level for much of the early trading day.

“People think Acer paid too much for Gateway,” said Andrew Teng, sales manager at Taiwan International Securities Corp. in Taipei. According to a rumor in the market, Acer and rival Lenovo Group Ltd. fought a bidding war for Gateway, upping the price, he added.

Lenovo declined to comment.

Stock and industry analysts offered negative views of the deal, and some feared Acer could run into the same problem with the merger as Taiwan’s BenQ Corp. did with its acquisition of Siemens AG’s mobile phone division, a business that ultimately filed for bankruptcy protection in Germany. The Siemens deal proved to be too costly for BenQ, which couldn’t turn the business around. The company, formerly part of the Acer Group, said it spent over $1 billion trying to make the purchase work.

There are only a few parallels with the Acer-Gateway deal, mainly that Gateway is viewed as a business in decline.

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Jim Love, Chief Content Officer, IT World Canada

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