Will Dell Buy Acer?

There has been speculation for months now that Dell (DELL) at some point will make a big acquisition. Most of thinking has been about diversifation moves. But Bernstein Research analyst Toni Sacconaghi proposes an idea that would boost Dell’s stake in the PC business: consider buying Acer.

In a research note Friday, Sacconaghi asserts that the PC sector is ripe for consolidation. He notes that the top 5 PC vendors accounted for 56% of industry units in 2008, and that the top 10 accounted for nearly 70%. Compare that, he suggests, with the x86 server market, where the top 5 players control more than 80% of the market, or the Unix server market, where the top 3 have more than 90%. It’s even lower than the high-def TV market, where the top 5 have 60% share, and the top 10 about 80%.

There has been some PC industry consolidation over the years; Hewlett-Packard (HPQ) bought Compaq; Lenovo bought [[IBM]]’s laptop business; Acer bought Gateway, which itself has acquired eMachines. But he thinks there is more to come. Consolidation could bring increased scale, cost efficiencies and broader and potentially complementary product and market exposure, he writes.

Surveying the industry, he concludes that a Dell/Acer combination would be the most attractive consolidation play. Of the top 10 vendors, Sacconaghi writes, only Acer and Lenovo are PC-only companies - and the large Chinese government stake in Lenovo makes a sale of the company unlikely, he contends. Acer and Dell, he says, have complementary market exposure, with Acer strong in notebooks outside the U.S. where Dell is weaker. He also noted that they have complementary distribution models, with Acer almost entirely indirect. If Dell bought Acer for a 20% premium - that would be $5.7 billion - Dell would boost revenue growth by 3 percentage points and add 12 cents a share to EPS.

Sacconaghi says an HP/Acer combination also could work, but wouldn’t be quite as complementary from a geographic market point of view.

The Top 10 PC makers, ranked by global market share:

• Hewlett-Packard: 18%
• Dell: 14%
• Acer: 11%
• Lenovo (LNVGY): 7%
• Toshiba: 5%
• Asus: 4%
• Apple: (AAPL): 3%
• Fujitsu/Fujitsu Siemens: 3%
• Sony (SNE): 2%
• Samsung: 1%
  

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Comments

[Hedged In:]

Very interesting -- particularly given Acer's strong position in netbooks.

May 03 03:36 PM

[Spook:]

If Acer will eventually go on sale, I will predict Asus acquiring Acer more than Dell can acquire Acer.

- Asus founder was one of the best design engineer of Acer in the early days
- although Asus and Acer product are the same, merging Asus and Acer will propel Asus to number 1
- Asus have better design than Acer in terms of engineering view
- following Acer steps, Asus spin off the manufacturing to concentrate on sales and marketing effort
- both companies are now very much focus on brand than OEM business

May 04 03:36 PM

[fredh:]

Hard to believe that Acer would make itself available to them.

On May 03 03:36 PM Hedged In wrote:

> Very interesting -- particularly given Acer's strong position in
> netbooks.

May 05 10:04 PM