Acer CEO Talks Gateway Acquisition, Vista Rollout

(Madrid) For most of the three hundred or so technology reporters here for Acer's Global Press Conference, this meeting is simply another annual update on the world's fourth largest PC company. In the U.S., however, Acer has long maintained a relatively low profile. So when American journalists from the U.S. and Canada talked over lunch with Acer president Gianfranco Lanci, most of the questions related to the Taiwanese company's planned acquisition of Gateway, the U.S.'s fourth largest computer manufacturer -- a buyout that promises to dramatically raise Acer's profile in the U.S. market.

During a speech earlier in the day's schedule of events, Lanci had appeared to say that with Gateway's sale of its professional division to MPC, the Gateway brand would be exiting direct sales and would be marketed only through resellers. That would be major news, considering that the venerable Gateway brand is second only to Dell as a name associated with direct sales of PCs.

At lunch, he clarified this statement, explaining that most, but not all Gateway sales will be through resellers: "Online sales are small...but in the U.S. for sure we will maintain this part. It's nice, but small." Overall, Lanci, who heads a company that has found success by catering to the needs of resellers, spoke guardedly about direct marketing, saying that as PCs become more commoditized, the direct sales model becomes less efficient.

He seemed happier talking about the Gateway deal's impact on the American reseller market, which is dominated by Hewlett-Packard through its HP and Compaq brands. Resellers, he said, "don't like to deal with one big guy -- they need three or four choices with the same capability and size."

"We're talking to customers," he said, speaking of resellers who currently sell Gateway PCs, as well as those who sell products from Packard Bell, the defunct American brand that is still prominent in Europe and which will become part of Acer as result of the Gateway acquisition. "For them, it's not going to change much, except they're dealing with a big company...that can guarantee delivery. When you play with a small company you always have doubt."

When asked about Acer's reputation for making PC buyers happy by aggressively driving down prices and forcing competitors to respond in kind, he laughed and declined to accept responsibility. "This market by definition is competitive -- you'd never admit that you're the first [to cut prices]. It'll continue, whether it's us, HP, or Dell -- I've never seen prices go up in the last twenty-five years."

Battle of the Brands

With the acquisition, Acer will control four major PC brands: Besides Acer, Gateway, and Packard Bell, it will pick up eMachines, a brand bought by Gateway in 2004. How will they coexist? Lanci said the brand breakdown will vary by market. In the U.S., the company will focus on Acer and Gateway, and "Gateway can even become the primary brand -- we're totally open." As for eMachines, he said it would likely return to its roots as a seller of budget-priced PCs.

Lanci said that Acer has no plans to immediately merge service and support operations for its company and Gateway: "We'll maintain the current state for some period -- there's no reason to change." Currently, he said, Acer performs its own repairs at a facility in Temple, Texas, while Gateway outsources service to a third party. "In Europe, [support integration will be] much worse, because they speak twenty-five languages."

No Gateway facilities will be shuttered as a result of the acquisition, he said; the company's major assembly operations will be divested as part of the sale of the professional division to MPC.

Several years ago, Gateway attempted to reinvent itself as a consumer electronics brand before retreating to PCs. Lanci said that Acer may bring LCD TVs, which it sells in other markets, to the U.S., but that it has no desire to be anything other than a successful computer manufacturer.

When asked about Ultra Mobile PCs, he expressed skepticism about current undersized PCs based on Microsoft's platform, saying that such systems will only become practical when they can run seven or eight hours on a battery charge. Acer is thinking about models that might make sense for it to sell, "but I call them ultra-mobile devices, not Ultra Mobile PCs."

Vista: Delayed Impact

In July, Lanci raised eyebrows with an interview in which he said that "the whole industry" was disappointed with Windows Vista and its impact on PC sales. At today's Global Press Conference, he reiterated that the rollout of Microsoft's newest operating system has been lackluster. "I think that when they introduced Vista, it was not ready," he said, pointing to lack of drivers as a particular problem. By contrast, "when [Microsoft] introduced XP, everything was ready."

But Lanci wasn't ready to declare Vista a long-term failure, saying that as compatibility issues and other problems are worked out, it should fare better: "They're going to fix it -- as usual."