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Acer to buy US cloud computing firm iGware for $320 mn

Acer to buy US cloud computing firm iGware for $320 mn
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First Published: Thu, Jul 21 2011. 04 20 PM IST
Updated: Thu, Jul 21 2011. 04 19 PM IST
Taipei: Taiwan’s Acer Inc will buy US-based cloud computing firm iGware Inc for $320 million, the fifth-largest ever Taiwanese buyout of a US company, as it seeks to move beyond its core hardware manufacturing business .
The world’s No.2 PC maker said it was also in initial talks with Japanese game firm Nintendo , a major client of iGware, over potential cooperation after the deal, but did not give details.
Acer has been refocusing on mobile devices to drive future growth after a troubled first half that saw the acrimonious departure of its chief executive after a row over the company’s strategy and a series of cuts to its shipment forecasts.
The company has been a dominant force in the PC business, particularly in the low-cost notebook segment, but has failed to counter the runaway success of tablets such as Apple’s hot-selling iPad, that have cut into PC sales and hurt profits.
“This (the acquisition) is the right direction for Acer,” said Tracy Tsai, an analyst at IT research company Gartner.
“Companies can no longer rely only on hardware; they have to bring new values to customers through providing applications and software services, and by that to increase their margin.”
Acer has opened a new global R&D centre in Chongqing, China, on Monday to enhance development of smartphones and tablet PCs. Acer will also make a further $75 million performance-based payout to iGware as part of the deal.
The total $395 million makes the deal the largest Taiwanese buyout of a US company this year, according to Thomson Reuters data.
The largest such deal on record was Acer’s purchase of US PC maker Gateway Inc for $761.5 million in 2007.
At a separate media briefing, Chairman J.T. Wang said the company will report a loss in the second quarter before returning to profit in the third and post a small full-year profit.
“Acer was in ICU (intensive care unit) but it has been discharged now. It will be more comfortable in the fourth quarter and return back to normal next year,” said Wang.
Analysts have cut their net income estimate for Acer by 13 percent over the past 30 days and now expect the company to report mean net income of T$5.33 billion for the year to December 2011, down 65 percent from a year ago.
As of Wednesday’s closing price, Acer shares had fallen 56% so far this year in a broader market down nearly 3%, while Asustek has gained 6.5% and Quanta is up 13.4%.
Wang said Nintendo is supportive of the deal and will pay Acer a $20-30 million service fee every year after the acquisition.
Nintendo spokeswoman in Tokyo Yuka Tanegashima declined to comment on whether Nintendo was a client of iGware. She said she was not aware of any talks with Acer.
‘Wasting money´
Some analysts were sceptical about the synergy iGware or Nintendo would bring to Acer.
“Acer is wasting its money. It’s spending almost $400 million on a small software company,” said Vincent Chen of Yuanta Securities.
“Why does it need a client like Nintendo, which doesn’t have a cloud or data centre? Acer has been wanting to do online gaming and server business, but it doesn’t have a clear vision in the cloud business.”
Acer said, “As a mid- to long-term investment objective, the valuable core technology and capabilities will help create uniqueness for the Acer brand.”
Acer will start integrating iGware into its cloud software and platform after completion of the deal by late September, and will launch an Acer Cloud product some time in 2012.
The acquisition will not add to short-term profit, the company said.
Silicon Valley based iGware offers cloud software and infrastructure tools that support more than 100 million consumer devices worldwide, including Nintendo game consoles.
Cloud computing refers to users of computers, smartphones and other devices accessing programs and files kept on server computers rather than installed on individual PCs.
The concept is gaining attention as PC makers contemplate making PCs and other linked devices portals to information and content stored elsewhere, lowering costs for their customers.
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First Published: Thu, Jul 21 2011. 04 20 PM IST