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| Why Should Gateway and Dell Merge? |
| Created on 12 August 2000 |
| Dell
& Gateway.. Probably two of the most recognisable brands in the
Computer World. The latter featuring the now legendary MOW, the spotted
cow, present in almost every computer magazine in UK and USA. In an
era where merger-acquisitions-consolidations are becoming a matter
of life or death (AOL-Timewarner-Netscape, Cnet-Zdnet etc) As far as I remember, Dell was founded by Michael Dell back in 1985 while Gateway was founded round about the same time in a way that somehow ressembles the way Hewlett and Packard founded HP: in a garage with peanuts in their pockets. Both started as Pionnering Startups. Michael Dell used to buy second hand computers and refurbish them and then resell them to companies. Today Dell isjust behind Compaq in terms of Worldwide sales while Gateway ranks #1 in the US in terms of Consumer Computer Sales. What motivates the urge behind merging Dell and Gateway is their complementary nature. 1. Web oriented v/s Personal Warmth Ever been to Dell's website and to Gateway's. No surprise that Dell Generates Most of its revenue from Internet Sales (in fact, they are the largest e-tailer around grossing more than ten million dollars daily - as far as I can remember...), more than 1/2 of its sales in fact. Dell rationalised its sales services, streamlining it to the Maximum. Comparitively, Gateway cultivates a more friendly and open approach. Gateway has nearly 500 Gateway stores worldwide and forged strategic alliances with Telecommunication Giant AOL to penetrate even more homes. 2. Internationalism v/s Local Dell has a very pronounced liking for internationalism and has always had advanced posts in Foreign Countries especially in Asia where Dell represents a very significant force. Gateway on the other hand is more home-biased, being one of the most recognised brands at home (ie IN USA). 3. Consumer v/s Corporate Dell Strategy is clearly targeting businesses and corporate. Their Website again illustrates that. Dell is very strong in the corporate sector where conservatism is the strongest (see next paragraph) and the adoption of new technologies or paradigms is taboo. Dell is weakest in the Consumer sector and strongest in the corporate sector - Corporates usually buy less computers BUT they pay MUCH MUCH more for them, whereas it is the opposite for the Consumer sector where sales depends on other caracteristics. 4. Conservatism v/s Openess Dell is the only one Computer Seller in the Top 10 NOT to use AMD CPU's in its machines for very obscure reasons (hint: Ask Intel). Dell has never been a hot acquiring Machine and has always been very rigourous in any thing that it does. Dell has always been in very good terms with Microsoft for very obscure reasons (Hint: Ask MicrosofT). Gateway on the Other hand has had two very important acquisitions in the name of Amiga AND ALR. The first one is still very popular with Europeans while the second still has its fans in the Corporate sector with the famous ALR Series of Servers (I forgot the name, sorry). Anyway, when it comes with relations with other important Manufacturers like Intel & Microsoft, Gateway has never been "tender". For example, it accused Intel of sales losses of US$ 250 millions and as a result, forged a strategic alliance with AMD planning to get half of its CPUs from them. Moreover, Gateway is in a better position to launch NetAppliances since it disposes of the Amiga platform anyway which is a formidable OS in any case. Whereas Gateway's shareholders are used to rather excentric moves by the company, anything that woudl change Dell's line of vision would almost certainly make its shares fall dramatically. A merger would therefore ease things more. 5. Aiming Number one Together, Dell and Gateway WILL become #1 worldwide on almost every field and every target market. From Palm PC to Farm Servers, yielding Tens of Billions Dollars of revenues. This Mega Merger would almost certainly force some giants out of Business. Dell and Gateway have been the pioneers behind the PC sales explosion worldwide, making quality PC's available for all at an affordable price, forget Local distributors of these wonderful machines, they just market them at a premium price. Before they appeared, Computers were really meant for Large Corporates and the home market was flooded with Amstrad's, Commodores, Atari and the likes. They were surely not the only ones but they were amongst the first. As one always like to say, opposite attracts. Still not convinced about a proposed merger of Dell and Gateway. What about a company grossing US$ 16 Billion Dollar with annual growth rate of 30%, with about 8 Millions system shipped yearly and more than 200,000 employees worlwide? Gateway has always been a darling of the PC industry attracting numerous acquisition or merger propositions: IBM, Compaq and Dell. Of the three, Dell should definitely be the winner. As sure as 1+1 = 2, these two make a very complete couple indeed, in every compartment. Other recommended reading sources Dell stands at the crossroads http://www.zdnet.com/eweek/stories/general/0,11011,2613454,00.html Dell Beats Q2 Estimates http://www.zdnet.com/eweek/stories/general/0,11011,2614199,00.html Dell Website http://www.dell.com Gateway Website http://www.gateway.com |
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