Gateway tries Platinum on for size

The PC maker is planning to expand a new premium brand as it looks for more profitable configurations.

Taking a cue from rival Dell, Gateway has rolled out a premium PC brand at Best Buy and is considerating expanding it to cover more products.
Gateway's Platinum Edition MX6450 notebook
credit: Gateway

Gateway is selling the MX6450 notebook for $1,199 under the Platinum Edition brand at Best Buy. It's only Platinum Edition PC that Gateway has on the market. The company is working on new PCs for the Platinum Edition brand that will include both desktops and notebooks, said Willian Diehl, vice president of marketing for Gateway.

"Platinum is the beginning of an upscale product line for Gateway," Diehl said. "The first step has been proving that we can sell the product at higher ASPs (average selling prices) without discounts and enable back-end service revenue."

As growth in the PC market appears set to slow during the next few years, PC companies are looking for new ways to keep their flagship products hot. At the same time, deteriorating margins make it impossible for PC makers to continue to race each other to new pricing lows.

Now vendors want to make more money on each sale of an individual PC, meaning they have to convince buyers to purchase configurations using more profitable components. One way that Dell has tried to do that is with its XPS line, a high-priced but powerful lineup of desktops and notebooks catering to gamers. The XPS PCs also come with premium services, like online support and free training classes.

Gateway's Platinum Edition brand was introduced exclusively at Best Buy in the fourth quarter. It is focused on entertainment, as opposed to Dell's focus on raw performance, Diehl said. It also comes with services that are offered in partnership with Best Buy, such as quick reponses to phone support calls and in-store checkups.

Analysts generally agree that PC makers need to "upsell" their customers, drawing them into stores or onto Web sites with low-price advertising but convincing them to upgrade to more profitable configurations before they buy. But Dell's recent decision to purchase Alienware shows that the premium-brand strategy might not be helping Dell reach the profitable and influential gaming community, said Stephen Baker, an analyst at NPD Techworld.

"Everybody's going to be looking at...a way to take their Toyotas and turn them into Lexuses," Baker said. PC companies often credit Japanese car makers Honda's and Toyota's creation of the Acura and Lexus luxury car brands as the inspiration for these premium-brand strategies. However, it's not yet clear whether these strategies are working for the PC industry, said Roger Kay, an analyst with Endpoint Technologies Associates.

Gateway has righted its financial ship since its acquisition of the low-cost eMachines brand in 2004, but is searching for ways to grow by looking at its larger, more entrenched rivals such as Dell and Hewlett-Packard and upstarts like Acer. CEO Wayne Inouye left the company in January, and the company is still searching for a full-time CEO.

The Platinum Edition MX6450 comes with Advanced Micro Devices' Turion ML-37 processor, 1GB of memory, and a DVD burner. A separate notebook with processors from Intel was introduced last quarter, Diehl said.

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