Gateway Completes Aquisition Of eMachines

From Gateway’s press release:

Following the close of the acquisition Thursday, which was initially announced on Jan. 30, eMachines CEO Wayne Inouye was named CEO of Gateway, succeeding Ted Waitt, who remains chairman and the company’s largest
stockholder.  Rod Sherwood continues to serve as the company’s CFO.

“This is a great day for both Gateway and eMachines,” Mr. Waitt said. “While there is considerable work ahead for us, I am confident that we will make fast progress at building a successful, profitable and growing company.”

As Gateway works on bringing the two organizations together, it will focus on expanding its joint product line into new channels and markets and adopting many elements of eMachines’ highly efficient operating model. 

Gateway will also benefit from increased scale.  The company will be the third-largest player in the U.S. PC market, with nearly 7% of the U.S. PC market and more than 25% of the U.S. retail PC market.  It will also be the eighth-largest PC company in the world, with growing sales in key international markets, including the UK, Japan and western Europe. 

As a result, Gateway expects to return to sustained profitability for 2005 as it benefits from increased sales growth, new cost savings and other synergies.

Mr. Inouye said, “By offering the customer multiple brands through multiple sales channels, Gateway will occupy a unique position in the industry.  This is a positive step for Gateway, its customers and its stockholders.

“We intend to get to work fast to solidify Gateway’s historical standing as the industry’s most efficient and competitive player, with a great reputation for quality and reliability across our product line and among all our customer segments,” he added. 

As disclosed previously in a filing with the U.S. Securities and Exchange Commission, Mr. Inouye’s compensation includes options to purchase 10 million shares of Gateway common stock, issued at a per share exercise price of $5.19, which represents today’s closing price of Gateway shares.  The options will vest over the course of a back-loaded, four-year timeframe, intended to encourage long-term retention, with a vesting schedule of one-tenth, two-tenths, three-tenths and four-tenths of the options over each of the next four years. 

In addition, 29 eMachines employees in management roles have been granted a total of 2.4 million shares of  Gateway stock upon their employment with the company, subject to entering into a stockholders’ agreement.  The 2.4 million shares are included in the aggregate 50 million shares issued by Gateway in the transaction.

Gateway said it will give further updates as appropriate on its progress on merger-related decisions and actions.

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