Dell is not the only troubled PC maker. Gateway is also in a mess. Actually, it seems like Gateway really is another way of saying "troubled." This stock has been torture, which is at a lowly $1.50. The high for the past year was $3.25.
Well, Harbinger Capital Partners, a hedge fund, sees this as an opportunity to agitate for change (i.e., a better stock price). To this end, the firm scooped up 10.2% of Gateway's outstanding shares. Harbinger Capital Partners also hired a group that knows how to attack lackluster managements: Firebrand Partners (yes, the name says it all). Steve Galloway is the founder of the firm, who also built the ecommerce site Red Envelope and is also a Clinical Associate Professor at The Stern School of Business, where he teaches brand strategy to 2nd-year MBA students.
The Gateway deal is potentially lucrative for Galloway. That is, he gets a 10% cut of any profits on the adventure.
His first step? He sent a letter to Gateway's management.
In theory, yes. Reality, however, is something very different.
I think Gateway should take-up the offer. After all, the group does own 10% of the company. Certainly, it's in Gateway's interest to communicate with shareholders. Besides, Gateway's financials are awful. In the second quarter, the company lost $7.7 million.
If not, I suspect things will get more hostile – which usually gets the stock price moving upwards.
Tom Taulli is the author of various books, such as the Complete M&A Handbook, and operates InvestorOffering.com.
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