PC maker Acer announced plans yesterday to acquire rival Gateway for $710 million, a deal that will make the Taiwanese company the world's No. 3 PC maker.

But don't say goodbye to Gateway just yet. Acer plans to keep the familiar U.S. brand, known for its cow-spot logo. It's also keeping the eMachines brand, which Irvine, Calif.-based Gateway acquired through a 2004 merger.

The deal "creates a more diversified and formidable company," Acer CEO J.T. Wang said.

Acer PCs are typically inexpensive laptops, with an average price of $606, says tech analyst Samir Bhavnani at researcher Current Analysis West. They're sold through resellers and several U.S. retail stores, including Costco and CompUSA, but Acer remains strongest in Asia and Europe. Gateway is a U.S. retail powerhouse with an average laptop price of $680, Bhavnani says.

Acer plans to pay $1.90 for each Gateway share, a premium over the stock's Friday closing price of $1.21. At their peak in 1999, Gateway shares fetched $80. They closed yesterday at $1.82.

The deal, which has been approved by the boards of both companies, is expected to close in December. Acer would not comment on potential layoffs.

The acquisition shouldn't cause prices to increase, says tech analyst Richard Shim at researcher IDC. Hewlett-Packard's 2002 purchase of Compaq Computer and Lenovo's 2005 acquisition of IBM's PC division didn't cause a spike. That's because most PCs are barely profitable, forcing manufacturers to squeeze every dollar, says tech analyst J.P. Gownder at Forrester Research. PC makers merge to strike better deals with parts suppliers, he says.

"This is what the industry has come to," Shim says. With an Acer-Gateway merger, four companies — HP, Dell, Lenovo and the new Acer — would account for nearly 53 percent of global PC sales, IDC says.

In early 2002, the top four players accounted for only 39 percent, IDC says.

Another merger could be on the way. Lenovo this month announced its desire to buy the parent company of Packard Bell BV, a European PC maker. But Gateway has the right of first refusal on a Packard Bell sale thanks to an earlier business relationship.

Gateway said yesterday that it plans to exercise that right, so Acer could end up acquiring Packard Bell and expanding Gateway overseas.

"We remain interested in Packard Bell, and we're reviewing our options," Lenovo spokesman Ray Gorman said.

Gateway also said it hopes to sell its business-computer division to another company.

The Acer sale will progress regardless, Acer says.