Larry Ellison, the wily old fox was right. Technology industry is too mature and needs to consolidate and right size itself. The world laughed at him, but if today’s $235 million bid by Gateway for Emachines is any indication, then he was spot on. The bidding for AT&T Wireless is another indicator that the industry is looking to consolidate. I think there are many more deals to come, and they should for Silicon Valley just has too many players selling commodity products with little or no differentiation. So really what is the difference between Gateway, Emachines and HP – they are pretty much same machines, with different logos and equally bad customer service. (KenRadio on the Deal.)

Any way, back to the merger. This clearly is a desperate move by Gateway. The company has become the Apple of the PC world. Iconic ads not withstanding, it only sold 526,000 PCs in the fourth quarter, down 6 percent sequentially and off 27 percent from a year ago. It also points to the fact, that the sweet spot of the PC market is “in the triple digits.” In comparison, Emachines has been able to establish their niche in the market and is also in stores like Best Buy. The combined company could be in the third place after Dell and HP, but it will also have presence in stores like Best Buy. Which is exactly what Gateway wants – a retail distribution channel. The merger also highlights the fact that while adjacent markets (Plasma screens, DVD players etc.) might look attractive, but in reality they don’t bring in the dollars to save the day.