Gateway aims for geeks and chic

Gateway this summer will be going both Hollywood and humble, as its PCs will be appearing in movies and on some RadioShack store shelves.

Under the RadioShack deal, the Poway, Calif., PC maker will begin stocking a small number of desktop PC models in RadioShack stores in Canada within the next few weeks, a Gateway representative said.

Meanwhile, Gateway PCs will show up in several summer movies, including a color-coordinated role in the upcoming movie "Legally Blonde 2." Gateway is preparing a special-edition notebook PC in pink, based on one of the machines that appear in the movie, according to sources familiar with the company's plans.

The new efforts to expand PC sales in Canada and to exploit the entertainment industry through television and movies are part of the company's wider strategy to return to profitability by year end. Gateway began formulating its plans earlier this year. It aims to cut costs and reduce expenses, while at the same time boost product sales through new distribution agreements and entry into new markets.

Ultimately, Gateway's management wants to transform the company's image from PC builder to purveyor of a broad range of technology products and forge a tighter relationship with customers. Gateway retail stores will play a key role in the transition. To that end, the company this year plans renovate most of its stores and launch 50 new products in 15 categories.

The bulk of the new products will be consumer electronics devices such as televisions and home theater equipment. But Gateway also plans to boost its core business--PCs--with new models such as the pink notebook and through distribution agreements such as the one with RadioShack.

Though Gateway has suffered a decrease in unit shipments to 506,000 in the fourth quarter, after shifting away from selling low-priced models, its new strategy appears to be helping in a broader sense. Rod Sherwood, Gateway's chief financial officer, has affirmed Wall Street's expectations for the company for the remainder of 2003. Meanwhile, Gateway CEO Ted Waitt told Reuters that the company had no plans for a management buyout that would take the company private.

Despite selling products directly to customers and the company's heavy emphasis on its own retail stores, Gateway has not shied away from working with distributors of late. The company also recently inked a deal with CDW Computer Centers, a U.S.-based distributor that focuses on smaller businesses. CDW now carries a handful of Gateway desktops and notebooks.

"This shows Gateway is willing to be a lot more channel-agnostic than it was before. It starts to look a lot more like Apple than it does Dell, which is saying, 'We're willing to be wherever the customer wants to buy,'" said Steve Baker, analyst with NPD Techworld. "It's acknowledging somewhat a limited reach, saying 'I need some other mechanisms to reach customers.' But, frankly, everybody has recognized that fact. Why else would Dell put up kiosks and HP sell direct online?"

Still, Gateway PCs will be sold only in RadioShack stores in Canada, where the retailer has about 900 locations, the Gateway representative said. RadioShack has a long-standing deal with Compaq Computer--now part of Hewlett-Packard--in the United States. It is not expected to offer Gateway PCs in stores here in the United States.

Gateway has also been selling PCs at Future Shop in Canada for several months now, the representative said.

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Gateway also recently stepped up its entertainment marketing program, through which it places its PCs in both television shows and movies.

Gateway PCs will have a notable presence in this summer's movies, including a color-coordinated cameo in "Legally Blonde 2," a company spokesman said. Gateway PCs are also featured in the movie "Bruce Almighty" and in television shows such as "The West Wing."

The PC maker also is preparing a special-edition Gateway 450 notebook entirely in pink, instead of silver, based on one of the machines that appear in the movie, according to sources familiar with the company's plans. The current Gateway 450 features a choice of different Intel mobile Pentium processors and 14-inch or 15-inch screens and starts at about $1,300.

The special edition is expected to be promoted in a special advertising campaign focused on Gateway's retail stores, in a move aimed to bring customers into those stores.

Gateway declined to comment on the special-edition PC.

Reuters contributed to this report.