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Wed 29 Aug 2007 12:00 AM

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Acer steals a march on Lenovo

Acer's decision to buy Gateway creates setback for rival Lenovo in its plans to take over European PC manufacturer Packard Bell.

Lenovo's plans to take over European PC manufacturer Packard Bell have hit a snag after US firm Gateway announced earlier this week it intended to exercise its right of first refusal to acquire Packard Bell's parent company.

The announcement came the same day as Lenovo rival Acer said it planned to acquire Gateway for $710 million.

Gateway said it had the right of first refusal on Packard Bell Holding as part of a June 2006 agreement with John Hui, owner of Packard Bell.

Its move puts a spanner in the works of Lenovo, which had planned to use Packard Bell to boost its consumer business and gain a foothold in Europe.

The Chinese firm said earlier this month it was in exclusive talks with Hui to buy Packard Bell, the third largest player in the European PC consumer market.

Should Gateway's counter move on Packard Bell succeed, Lenovo will be hard pressed to expand its consumer business, analysts say.

"Lenovo will have to go back to what they were doing earlier, which is build their own distribution channels. It's taking away their easy entry into the European market," Jenny Lai, a Taiwan-based analyst with CLSA told Reuters.

However, not all analysts believe that Gateway's interest in Packard Bell will scupper Lenovo's plans to buy the European firm, with some stating that it might just up the ante in the price battle.

"Acer doesn't really need Packard Bell in Europe, but Lenovo really needs it. My guess is Acer will force Lenovo to pay a higher price for it," an analyst at a major investment bank opined to Reuters.

Acer and Lenovo have been battling it out over the third place in the global PC industry behind HP and Dell.

The purchase of Gateway would enable it to create a company with over $15 billion in revenues and shipments in excess of 20 million PC units per year, securing its position as the world's third largest PC player, Acer said.

"Both Acer's and Gateway's geographical presences and product positioning are highly complementary. We believe that our combined scale will lead to significant efficiencies," commented Gianfranco Lanci, president of Acer.

Acer already has the lead on the Chinese PC firm in the Middle East, where it claims to hold the number two and three spots in the Middle East notebook and PC markets respectively.

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