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Gateway elected No. 1 by PeoplePC

PeoplePC, which sells customers new computers bundled with Net access for a monthly fee, says it is making Gateway its PC of choice.

PeoplePC, which specializes in bundling new computers with Internet service for a monthly fee, said Monday that it is making Gateway its PC of choice.

The deal means that new customers signing up with PeoplePC will get a new Gateway PC along with four years of Internet service for a fixed fee, ranging from $25 a month to $45 a month, depending on the model chosen. In the past, PeoplePC has featured computers from Hewlett-Packard and others.

The Gateway models now offered include the Gateway 300S, 300X and 500X desktops and the Gateway 1450SE notebook.

San Francisco-based PeoplePC, which was acquired by Internet service provider EarthLink earlier this year, made a name for itself by signing deals with large companies looking to give their workers a free computer as a fringe benefit.

However, the market for such deals soured along with the economy. Some companies that had announced such programs, such as early PeoplePC customer Ford Motor, later scrapped the project. Opinions from analysts were mixed on whether workers who were given a home PC became more productive.

As a result, PeoplePC expanded its efforts to offer PCs with bundled Internet service directly to consumers for a combined monthly fee. That is where the company is focusing most of its attention these days.

Monday's deal is the first link-up between PeoplePC and Gateway. PeoplePC, which claims to have 550,000 members, previously used computers from Hewlett-Packard, Compaq, Toshiba and IBM.

The deal with Gateway is not exclusive, a representative from the PC manufacturer said. However, all of PeoplePC's current offers feature only Gateway computers. Existing PeoplePC members have to wait until their current agreement ends to switch to a Gateway model, the company said in a posting on its Web site.

"While we can't offer to exchange your computer in the middle of our agreement, when you renew your membership, you'll have the opportunity to purchase a new computer from the quality vendor we'll be using at that time," the posting said.

A Gateway representative said PeoplePC will be responsible for marketing the Gateway computers, but was unable to estimate how many machines the company might sell as part of the relationship with PeoplePC.

PeoplePC is just now starting the process of renewing contracts for its earliest customers and is not releasing a projection of how many customers it will retain, a company representative said.