Acer to buy Cloud computing firm, Igware for $320 million

Reuters

Acer Inc (New Taipei City, Taiwan), an electronics manufacturer, announced on Thursday it will buy cloud computing firm iGware Inc (Mountain View, Calif., U.S.A. ) for $320 million, in the fifth-largest Taiwanese buyout of a U.S. company.

Acer, who is the world's second largest 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.

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 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 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 U.S. company this year. The largest such deal on record was Acer's purchase of U.S. 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.

Analysts have cut their net income estimate for Acer by 13% 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% 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.

(Additional reporting by Isabel Reynolds in Tokyo; Editing by Jonathan Standing and Vinu Pilakkott)

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