Shares of the third largest computer manufacturer in the U.S., Gateway Inc. (GTW) shot up as much as 8.4% and closed up 6.7% on speculation it may be an acquisition target. Analyst believe Taiwanese computer manufacturer Acer Inc. was hoping to make an acquisition in the PC area within the next two years, and that would be Gateway. Analysts said Gateway is a likely candidate for a possible strategic buyout.
Such a transaction would put a company like Acer, with a faint presence in the U.S., in third place in the domestic PC race behind
Hewlett Packard (HPQ). However till date both companies have declined to comment on this speculation.
Lenovo, the Chinese computer manufacturer that bought IBM's PC business for $1.75 billion in 2005, was also thrown into the mix.
In September, Gateway rejected a $450 million offer for its retail business. Last month it said it would lay off more workers and cut $20-25 million in expenses.
Gateway had already cut nearly 100 jobs, or about 5% of its work force, in the third quarter of last year.
Stocks: Gateway Inc. (
GTW).
Competitors: Dell Inc. (
DELL), Hewlett-Packard Co. (
HPQ), Lenovo Group Ltd. (
LNVGY), International Business Machines Corp. (
IBM).
ETFs: SPDR Technology (
XLK), iShares Goldman Sachs Technology Index Fund (
IGM), iShares Dow Jones US Technology Index (
IYW)
(Source: SeekingAlpha)
IBM announced Tuesday it is expanding its stock-buyback program by $15 billion, potentially reducing outstanding shares by 10%, and increasing its dividend from $0.30 to $0.40 a share. IBM said that as a result of the share repurchase, 2007 EPS growth will be 12%-14%, 1%-3% higher than previously expected. Treasurer Jesse Greene said IBM has been "very underleveraged" with only $700 million in core debt, and $10.8 billion in cash. He would not disclose how much new debt the company would take on to fund the buyback. Moody's and Standard & Poor's said the plan would not affect IBM's debt ratings, but Fitch Ratings placed IBM on Rating Watch Negative following the announcement. CEO Samuel J. Palmisano said the moves "underscore the strength of IBM's business model and our strategy" saying its fiscal strength, "gives us significant financial flexibility to use our capital to drive growth through investments in acquisitions and capital expenditures, and to increase returns to shareholders through dividends and stock repurchase." The company said it may complete a substantial portion of the repurchases during the next several months. Shares rose $3.28 (3.5%) to close at $98.49.
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