Acer shedding eMachines, preparing post-PC Gateway and Packard Bell

Acer adapts to post-PC era, will add non-PC products to Gateway and Packard Bell lineups

Acer is trying to adapt to the slowdown in the PC market by shutting down its eMachines unit and refocusing Gateway and Packard Bell to offer new products that are "beyond the PC".

Earlier this week, Acer took charges to the tune of $120.1 million related to the lost value of assets including the Gateway, eMachines and Packard Bell product brands. The company announced it would discontinue the eMachines brand, which is U.S.-focused, but will continue to offer Gateway and Packard Bell products.

"As computing devices are used in new ways, both on the go and throughout the home, Gateway and Packard Bell will adapt their product portfolios to meet these needs," said Lisa Emard, an Acer spokeswoman, in an email on Thursday.

Emard did not comment on what types of products would be offered under the Gateway and Packard Bell brands. But the new computing environment involves new and different usage models and form factors, and Acer will continue to invest in Gateway and Packard Bell to sell "a variety of devices that would have been thought of as beyond the PC in the past," Emard said.

The products could include tablets, which are increasingly being used as an alternative computing device to PCs. Other devices like smart TVs, media-streaming boxes and smartphones are also being used to browse the Web, write email and stream movies from sites like Netflix.

Acer in 2007 paid $710 million for Gateway, and in the process acquired Packard Bell's assets. Gateway acquired eMachines in 2004, and Packard Bell in 2007. Gateway's laptops, desktops and displays are now being sold in the Americas and Asia-Pacific, while Packard Bell products are sold in Europe, the Middle East and Africa.

Acer already offers a range of PCs, tablets, smartphones, servers, networking and storage products worldwide. But the company's main business still revolves around PCs, which is a slumping market with overall worldwide unit shipments dropping by 6.4 percent in fourth quarter compared to the same quarter in 2011, according to IDC. Acer was the fourth largest PC vendor behind Hewlett-Packard, Lenovo and Dell, with shipments of around 7 million units, a drop of 28.2 percent compared year over year.

No eMachine-branded products will be sold in the future, but its website will remain live for customer support, Emard said. Gateway stopped selling PCs through its website in 2008, and is now selling fixed configuration products through third-party online stores and retailers.

Acer became a bloated company with all those acquisitions, and the latest moves are an effort to shed excess fat and be more agile, said David Daoud, research director at IDC.

Acer has had trouble making operational adjustments since the 2011 departure of former CEO Gianfranco Lanci, who orchestrated the acquisitions and promoted a multi-branded strategy. Lanci now works with Lenovo.

"They spent a lot of time and resources in the netbook market, and that hasn't paid off," Daoud said, adding that eMachines did well in the entry-level PC market many years ago, but customers have moved away from those products.

The company now has to step back and see what existing customers want, Daoud said. Gateway could ultimately offer tablets, but it is hard to see smartphones in their mix, Daoud said.

Acer's moves are also part of a larger trend for PC companies to offer simpler products. There is more focus on cloud, software, graphics and other features that are critical to boost hardware sales.

While Acer's market share is dwindling, its Taiwanese counterpart Asustek has done well, with PC shipments growing 5.6 percent year-over-year in the fourth quarter. Both companies were top netbook vendors, but after a few quarters of struggling Asus is now growing, while Acer is flagging.

Acer and Asus are have different management styles, with Asus' team being more proactive and flexible, and Acer's team being slow to react, Daoud said.

Asus is also well-respected by channel partners, while Acer can't say the same, Daoud said. Asus has also been praised for innovative products like Taichi, while Acer is more cautionary. Asus has been much more keen on embracing Windows 8 and RT with products like the VivoTab RT tablet, while Acer is still waiting to see how the OS does before releasing a product.

"For Acer it's a bit of work in progress," Daoud said.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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