Gateway Completes eMachines Acquisition, Names New CEO
Mar 12, 2004
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Computer and consumer electronics company Gateway, Inc. announced that it has completed its acquisition of privately held eMachines, a maker of PCs, for 50 million shares of Gateway common stock and $30 million cash.
Following the close of the acquisition, which was initially announced on Jan. 30, eMachines CEO Wayne Inouye was named CEO of Gateway, succeeding Ted Waitt, who remains chairman and the company's largest stockholder. Rod Sherwood continues to serve as the company's CFO.
"This is a great day for both Gateway and eMachines," Mr. Waitt said. "While there is considerable work ahead for us, I am confident that we will make fast progress at building a successful, profitable and growing company."
As Gateway works on bringing the two organizations together, the company said it will focus on expanding its joint product line into new channels and markets and adopting many elements of eMachines' operating model.
Gateway said it will also benefit from increased scale. The company will be the third-largest player in the U.S. PC market, it claims, with nearly 7 percent of the U.S. PC market and more than 25 percent of the U.S. retail PC market. It also said it will be the eighth-largest PC company in the world, with growing sales in key international markets, including the UK, Japan, and western Europe.
As a result, Gateway said it expects to return to sustained profitability for 2005 as it benefits from increased sales growth, new cost savings and other synergies.
"By offering the customer multiple brands through multiple sales channels, Gateway will occupy a unique position in the industry," Mr. Inouye stated. "This is a positive step for Gateway, its customers and its stockholders.
"We intend to get to work fast to solidify Gateway's historical standing as the industry's most efficient and competitive player, with a great reputation for quality and reliability across our product line and among all our customer segments," he added.
As disclosed previously in a filing with the U.S. Securities and Exchange Commission, Mr. Inouye's compensation includes options to purchase 10 million shares of Gateway common stock, issued at a per share exercise price of U.S. $5.19. The options will vest over the course of a back-loaded, 4-year timeframe that Gateway says is intended to encourage long-term retention, with a vesting schedule of one-tenth, two-tenths, three-tenths, and four-tenths of the options over each of the next 4 years.
In addition, 29 eMachines employees in management roles have been granted a total of 2.4 million shares of Gateway stock upon their employment with the company, subject to entering into a stockholders' agreement. The 2.4 million shares are included in the aggregate 50 million shares issued by Gateway in the transaction.
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