Taiwan-based computer maker Acer Inc. wants to become king of an industry that
is known for its slow growth and profits that have become doubly difficult to
make. Even the recent
$710
million purchase of struggling Gateway Inc. might hurt Acer more than add to
its bottom line. And it's that gloomy near-term outlook that credit rating
agency Fitch Ratings sees for Acer. Fitch placed its BBB- rating on Acer on its
credit watch negative list. The Wednesday move signals the rating agency
will most likely downgrade the Taiwanese company once the deal is finalized
causing higher borrowing costs for Acer.
Fitch says it's concerned with the strategy Acer will employ to merge Gateway
into its fold. Most notably, Fitch points to challenges in integrating supply
chains, streamlining distribution channels and segmenting its products on the
market. "Facing continuous margin pressure amid competition, the new Acer is
likely to see lower profitability during the initial stages after the
acquisition before largely enhancing the operating efficiency of former Gateway
units," Fitch said in a press release. Bottom line, the near term may be a rough
patch for Acer.
Overall, the deal will push Acer to the No. 3 largest personal computer maker in
the world, but its taking on Gateway looks more like a beast of burden than a
sweet addition for the acquisitive Taiwanese company. — Gerald
Magpily
See
The Deal Aug. 27 article
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