Acer Heading to Cloud with iGware Acquisition

Reuters reports that the world's second largest PC maker, Acer Inc., plans to purchase Silicon Valley-based cloud computing firm iGware for $320 million in cash and stock. Acer will also shell out an additional $75 million performance-based payout to iGware as part of the deal. This acquisition will reportedly be the fifth-largest Taiwanese buyout of a U.S. company ever, trailing behind Acer's acquisition of Gateway for $761.5 million back in 2007.

"This 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."

Although its simple website doesn't reveal anything about what goes on under its roof, iGware provides cloud software and infrastructure tools that support more than 100 million consumer devices worldwide, including Nintendo game consoles. Acer is expected to integrate iGware into its cloud software and platform as Acer Cloud Technology Co. after completion of the deal by late September. An actual Acer Cloud product is slated to launch sometime during 2012.

But because Nintendo is one of iGware's major clients, both parties are supposedly in talks over a potential cooperation after the acquisition. Nintendo is supposedly in favor of the deal and plans to shell out a $20-30 million service fee to Acer every year after the deal is signed. Yet some analysts aren't thrilled with the acquisition or Acer's potential involvement with the Japanese gaming company.

"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 center? Acer has been wanting to do online gaming and server business, but it doesn't have a clear vision in the cloud business."

Earlier in March of this year, Acer's CEO Gianfranco Lanci stepped down from his position, thus pushing the company to name Jim Wong as the new corporate president a month later. Then in June Acer revealed that it will book a $150 million charge to earnings so that it could write-off disputed accounts in Europe regarding overall inventory management and related "abnormalities."

But despite some setbacks in 2011 alone, Acer has been focusing its energies on tablets and smartphones to drive future growth, following other tech companies like Microsoft, Apple, Google and HP who are also offering mobile devices and cloud-based services. According to market research firm IDC, the cloud is the future, with the sector expected to grow 27-percent annually over the next five years.

"Acer Cloud will be the firm's key differentiator for the next 10 years," said Henry Wang, deputy spokesman of Acer, at a news conference Thursday.

"As a mid- to long-term investment objective, the valuable core technology and capabilities will help create uniqueness for the Acer brand," the company said in a separate statement.