Gateway shares jump on $450m bid

Shares of Gateway, a struggling US computer maker, jumped more than 13 per cent on Wednesday after Lap Shun Hui, a China-born entrepreneur, made an unsolicited $450m bid for the company’s retail operation.

Gateway, whose stumbles have relegated the company to a distant third in the US computer market behind Dell and Hewlett-Packard, said its board would review the offer.

In a letter to Gateway on Monday, Mr Hui, who sold eMachines, a low-cost PC maker, to Gateway in 2004 for $290m, urged the company to “adopt a sense of urgency” to address increased competition and a declining stock price.

“In order to compete effectively, Gateway must separate its retail operations from its other businesses and make other changes to improve its margins,” he said.

Shares of Gateway have fallen more than 60 per cent in the two years since the eMachines acquisition. They jumped 13.4 per cent to $1.95 by the close of trading in New York, implying a market capitalisation of $725m.

Disappointing results led Wayne Inouye, the former head of eMachines, to step down as Gateway’s CEO in February. The company has yet to name a permanent replacement. After years in the ranks of the Fortune 500, Gateway was booted from the list for 2006.

This month, Gateway reported a net loss of $7.7m for the second quarter, compared with a net profit of $17.2m last year. The company’s retail unit accounted for more than half of the company’s $919m in sales in the period.

Mr Hui said on Wednesday that he and Gateway had a “fundamentally different view of the current PC environment and what it takes to be successful in the increasingly competitive PC business”. He said he would consider bidding for the entire company and spinning off the retail business later if Gateway preferred.