MPC finalizes Gateway Pro deal
By Dave Dreeszen Journal business editor | Posted: Wednesday, October 03, 2007
NORTH SIOUX CITY -- After 16 years with Gateway Inc. in North Sioux City, Tim McCabe has a new corporate boss.
MPC Corp. finalized its $90 million deal for Gateway's professional division Tuesday. As a result, McCabe, senior director of sales, and several hundred of his colleagues officially joined the Nampa, Idaho-based computer maker.
As it had first announced on Sept. 5, MPC plans to keep the Gateway Pro division and all of its workers in North Sioux. Counting some support staff from other departments, a total of 475 employees are transitioning to MPC at their current level of pay and benefits, said Ross Ely, MPC's executive vice president for sales and marketing.
McCabe, who has been in education, business and government sales nearly his entire career at Gateway, said he is excited about going to work for MPC. Like Gateway's Pro division, MPC specializes in the sale of custom-built desktops, notebooks, servers and related products for the business, education and government sectors.
"Gateway was always a consumer brand," McCabe said. "To work on the pro side, you didn't get all of the attention, which was understandable.
"We were really excited when they announced the MPC deal because we knew MPC only dealt with pro customers. Now the entire company is going to be focused on the success of the sales team and the market we're going to serve."
MPC will keep Gateway Pro name
The Gateway workers joining MPC represent about half of the total work force at the Gateway complex. The remaining North Sioux Gateway workers are waiting to hear what Acer Inc. plans to do once it completes its $710 million deal for Gateway.
In a separate announcement Tuesday, Taiwan-based Acer said it is extending its tender offer for Gateway to Oct. 10 to give U.S. regulators more time to complete their review of the deal, which would create the world's third largest PC maker.
At the time of the Acer announcement, Gateway said it was in separate talks to spin off its professional segment to a third party, which turned out to be MPC.
MPC has signed a five-year lease to occupy office space on the second floor of the Argentina building, which is connected to the rest of the Gateway campus by a skywalk. Ely said Gateway Pro employees will be moving to their new desks over the next eight weeks.
MPC plans to keep the Gateway Pro name and all of its products, and then transition to the MPC brand within a year.
Under the deal, MPC assumes responsibility for the Gateway unit's operations and warranty support services, valued at about $60 million. Gateway also will invest about $10 million in MPC for a 19.9 percent stake in the publicly traded company. MPC also was required to raise an additional $9 million by exercising some of its outstanding warrants, which are priced at $1.10 per share.
MPC, which was once part of technology giant Micron Technology, exited the consumer PC market about five years ago, following the dot.com bust, to focus on niche government and business markets. Ely said MPC's acquisition of Gateway's Pro division will allow the company to better compete in that arena with much larger players like Dell and H-P.
"It makes us more competitive from a scale perspective," Ely said in an interview at Gateway's executive offices in North Sioux. "We feel like we'll be able to compete and talk about our areas of differentiation and value like service and support, and at least be in the game on the area of price competitiveness."
"I really believe the market is starved for a player like this," McCabe added.
Little overlap between companies
Ely noted Gateway Pro complements MPC's business, with little overlap between the two.
Sales to federal agencies, including the military, and mid-to-large size businesses, including several large hospitals, account for about 75 percent of MPC's annual sales, he said.
The company's strength is serving customers in need of complicated network and large computer services and storage capacity.
Gateway Pro, in comparison, has much stronger sales to secondary schools and colleges, as well as state government. Education and state government sales account for about 70 percent of the segment's business, he said.
The professional division purchase, which includes Gateway's new assembly plant in Nashville, Tenn., would quadruple MPC's annual revenues to $1.2 billion and more than double its total employment, from 550 to 1,200. MPC has 537 employees in the Boise area.
In recent years, MPC has lost money and cut staff, warning repeatedly in filings with the U.S. Securities and Exchange Commission that bankruptcy was a possibility. More recently it has reported a slight uptick in its earnings.
MPC stock, which trades on the Amex exchange, closed at 87 cents a share Tuesday, up 10 cents. On the day the Gateway purchase was announced, the stock fell 34 cents to close at $1.59.
Workers have passion for Gateway culture
Ely said MPC has spent the last 12 to 18 months restructuring its organization and finances, with plans to grow its business.
"There's no guarantees about this," he said. "We certainly will have our ups and downs going forward. But we feel this puts us in a position to become financially viable. We certainly believe that with the know how that we bring to this, plus the scale of Gateway Pro, that we can build a business here that is financially viable for the long term."
Like MPC, Gateway has had its share of ups and downs. McCabe joined the then-upstart computer maker in 1990 as a member of the first night shift sales team. At the time, the former Morningside College football player was earning extra money as he served as an assistant coach at Morningside and pursued his graduate degree at the nearby University of South Dakota.
McCabe won repeated promotions over the next 13 years, managing several different sales groups. He left the company for a year to manage a call center in Indianapolis, Ind., and then returned to Gateway in North Sioux City. Most recently, he has led the entire inside sales team in the professional division.
Veteran employees like himself, he said, have long had a "passion" for the Gateway culture. "That's why people stay here and continue to work," he said.
Now, many of those same employees are looking forward to their new mission with MPC, with hopes of rekindling some of the success that Gateway experienced in the 1990s.
"I think everybody feels if we do this right, this could be another wave we could ride," McCabe said. "We are kind of in control of our own destiny. I think what we'll find out is the people out here will step up to the challenge."
Acer extends offer for Gateway
Acer Inc. said Tuesday it is extending its tender offer for Gateway Inc. to Oct. 10.
Monday was the original deadline for the $710 million deal. The delay, the Taiwan-based firm said, gives U.S. regulators more time to complete their review of the acquisition, which would create the world's third largest PC maker.
Acer said 80.68 percent of Gateway's shares had been tendered as of Monday. That's well beyond the minimum 70 percent needed to allow the deal to proceed.
Gateway co-founder and retired CEO Ted Waitt, who holds about a 20 percent share in the company, is among the large Gateway shareholders backing the Acer deal.
MPC Corp. finalized its $90 million deal for Gateway's professional division Tuesday. As a result, McCabe, senior director of sales, and several hundred of his colleagues officially joined the Nampa, Idaho-based computer maker.
As it had first announced on Sept. 5, MPC plans to keep the Gateway Pro division and all of its workers in North Sioux. Counting some support staff from other departments, a total of 475 employees are transitioning to MPC at their current level of pay and benefits, said Ross Ely, MPC's executive vice president for sales and marketing.
McCabe, who has been in education, business and government sales nearly his entire career at Gateway, said he is excited about going to work for MPC. Like Gateway's Pro division, MPC specializes in the sale of custom-built desktops, notebooks, servers and related products for the business, education and government sectors.
"Gateway was always a consumer brand," McCabe said. "To work on the pro side, you didn't get all of the attention, which was understandable.
"We were really excited when they announced the MPC deal because we knew MPC only dealt with pro customers. Now the entire company is going to be focused on the success of the sales team and the market we're going to serve."
MPC will keep Gateway Pro name
The Gateway workers joining MPC represent about half of the total work force at the Gateway complex. The remaining North Sioux Gateway workers are waiting to hear what Acer Inc. plans to do once it completes its $710 million deal for Gateway.
In a separate announcement Tuesday, Taiwan-based Acer said it is extending its tender offer for Gateway to Oct. 10 to give U.S. regulators more time to complete their review of the deal, which would create the world's third largest PC maker.
At the time of the Acer announcement, Gateway said it was in separate talks to spin off its professional segment to a third party, which turned out to be MPC.
MPC has signed a five-year lease to occupy office space on the second floor of the Argentina building, which is connected to the rest of the Gateway campus by a skywalk. Ely said Gateway Pro employees will be moving to their new desks over the next eight weeks.
MPC plans to keep the Gateway Pro name and all of its products, and then transition to the MPC brand within a year.
Under the deal, MPC assumes responsibility for the Gateway unit's operations and warranty support services, valued at about $60 million. Gateway also will invest about $10 million in MPC for a 19.9 percent stake in the publicly traded company. MPC also was required to raise an additional $9 million by exercising some of its outstanding warrants, which are priced at $1.10 per share.
MPC, which was once part of technology giant Micron Technology, exited the consumer PC market about five years ago, following the dot.com bust, to focus on niche government and business markets. Ely said MPC's acquisition of Gateway's Pro division will allow the company to better compete in that arena with much larger players like Dell and H-P.
"It makes us more competitive from a scale perspective," Ely said in an interview at Gateway's executive offices in North Sioux. "We feel like we'll be able to compete and talk about our areas of differentiation and value like service and support, and at least be in the game on the area of price competitiveness."
"I really believe the market is starved for a player like this," McCabe added.
Little overlap between companies
Ely noted Gateway Pro complements MPC's business, with little overlap between the two.
Sales to federal agencies, including the military, and mid-to-large size businesses, including several large hospitals, account for about 75 percent of MPC's annual sales, he said.
The company's strength is serving customers in need of complicated network and large computer services and storage capacity.
Gateway Pro, in comparison, has much stronger sales to secondary schools and colleges, as well as state government. Education and state government sales account for about 70 percent of the segment's business, he said.
The professional division purchase, which includes Gateway's new assembly plant in Nashville, Tenn., would quadruple MPC's annual revenues to $1.2 billion and more than double its total employment, from 550 to 1,200. MPC has 537 employees in the Boise area.
In recent years, MPC has lost money and cut staff, warning repeatedly in filings with the U.S. Securities and Exchange Commission that bankruptcy was a possibility. More recently it has reported a slight uptick in its earnings.
MPC stock, which trades on the Amex exchange, closed at 87 cents a share Tuesday, up 10 cents. On the day the Gateway purchase was announced, the stock fell 34 cents to close at $1.59.
Workers have passion for Gateway culture
Ely said MPC has spent the last 12 to 18 months restructuring its organization and finances, with plans to grow its business.
"There's no guarantees about this," he said. "We certainly will have our ups and downs going forward. But we feel this puts us in a position to become financially viable. We certainly believe that with the know how that we bring to this, plus the scale of Gateway Pro, that we can build a business here that is financially viable for the long term."
Like MPC, Gateway has had its share of ups and downs. McCabe joined the then-upstart computer maker in 1990 as a member of the first night shift sales team. At the time, the former Morningside College football player was earning extra money as he served as an assistant coach at Morningside and pursued his graduate degree at the nearby University of South Dakota.
McCabe won repeated promotions over the next 13 years, managing several different sales groups. He left the company for a year to manage a call center in Indianapolis, Ind., and then returned to Gateway in North Sioux City. Most recently, he has led the entire inside sales team in the professional division.
Veteran employees like himself, he said, have long had a "passion" for the Gateway culture. "That's why people stay here and continue to work," he said.
Now, many of those same employees are looking forward to their new mission with MPC, with hopes of rekindling some of the success that Gateway experienced in the 1990s.
"I think everybody feels if we do this right, this could be another wave we could ride," McCabe said. "We are kind of in control of our own destiny. I think what we'll find out is the people out here will step up to the challenge."
Acer extends offer for Gateway
Acer Inc. said Tuesday it is extending its tender offer for Gateway Inc. to Oct. 10.
Monday was the original deadline for the $710 million deal. The delay, the Taiwan-based firm said, gives U.S. regulators more time to complete their review of the acquisition, which would create the world's third largest PC maker.
Acer said 80.68 percent of Gateway's shares had been tendered as of Monday. That's well beyond the minimum 70 percent needed to allow the deal to proceed.
Gateway co-founder and retired CEO Ted Waitt, who holds about a 20 percent share in the company, is among the large Gateway shareholders backing the Acer deal.
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