Gateway board rejects buyout offer

Gateway has rejected an offer to sell its retail arm to John Hui, founder of the company's eMachines line.

Gateway has rejected an offer to sell its retail arm to the man who founded the company's eMachines line.

Lap Shun "John" Hui surprised Gateway's board in August when he offered to buy their retail operations for a reported US$450 million. Gateway issued a statement Friday saying it had decided that the offer was not in the best interest of its shareholders.

In 2004, Gateway paid Hui $234 million to acquire his company eMachines, a line of entry-level PCs. Hui used the money to start an office supplies company, and still owns about 5 percent of Gateway's stock.

Hui's offer would have stripped Gateway of its agreements with third-party resellers like Best Buy, Circuit City Stores and Wal-Mart Stores. The company sells the rest of its computers through direct sales channels on the telephone and Internet, and through its professional business channel.

Gateway is the third-largest PC vendor in the U.S. but has posted financial losses for several quarters. Still, analysts said that breaking the company up would not have made it more competitive.

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