Taiwanese PC vendor Acer is acquiring Gateway for $710 million in stock ($1.90 per share) in a deal that should mean more difficult times ahead for struggling computer company Dell.

The merger would lead to a company with $15 billion in annual sales and 20 million PCs shipped.

Acer intends to retain the Gateway brand creating a multi-brand PC company.

The deal will make Acer the No-3 PC vendor globally behind HP and Dell besides strengthening its position in the U.S.

The purchase should more than double Acer’s PC market share in the U.S. to about 10.8%. 

Acer has been aggressively courting customers in the U.S. market with very low prices. We purchased an Acer dual core Intel PC with a 19-inch LCD monitor in early August for $389.00 at Circuit City. Best Buy and CompUSA also sell Acer PCs in their U.S. stores giving the company a wide retail footprint.

Acer already has a strong position in Asia and Europe.

Acer expects the deal to provide significant revenue and cost synergies.

The increase in scale should result in reductions in per unit procurement and component costs for both companies and cross-selling opportunities. Acer put the pre-tax synergies at $150 million.

Founded in 1985, Gateway was once considered a frontrunner in the PC business but its fortunes have ebbed significantly in the last few years.

Separately, Gateway said it was buying European PC vendor Packard Bell BV.

For Dell, the Acer-Gateway deal couldn’t have come at a worse moment.

Dell is struggling with accounting scandals, management turmoil and a resurgent HP.

The last thing it needs is another strong PC vendor on its hometurf, the U.S. market.