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Gateway to offer buyers free Net access

The company unveils an incentive plan that offers buyers of its PCs free internet service for their first 150 hours of Web surfing, per month, for a year.

Gateway took another step toward transforming itself into a one-stop online purveyor of both PCs and related peripherals, and indicated it will begin offering a year of free Internet access to boot.

Gateway, the second largest direct PC vendor, bought a 20 percent stake in NECX, a closely held online seller of computers and other electronic products, for about $21 million. Gateway said it has the option to buy all of NECX's Internet business in the future.

The companies plan to start an Internet site called to sell Gateway products and computer equipment that goes along with them.

"This is about providing customer choice and providing something that people want ... we want to provide all the solutions our customers need, both for consumers and businesses," Gateway CEO Ted Waitt said in a conference call today. "The opportunity exists once you have that engine to expand it to other offerings."

Many of the largest PC makers are working on plans to transform themselves into online-based resellers of both PCs and related equipment, as they cast about for ways to create ongoing revenue streams that offset ever-decreasing PC prices. In Gateway's case, there's the potential to sell hardware, software, networking equipment, and services from a variety of different companies.

To date, Gateway has sold peripherals and software concurrent with a PCs purchase. Now, the company has the opportunity to drive customers to an online store it owns and capture revenue after the original sale.

Compaq is already pursuing a similar strategy, having announced its intention to acquire online vendor The company hopes to steer users of its AltaVista portal to its own shopping site. Gateway also unveiled a plan that offers buyers of its PCs free internet service for their first 150 hours of Web surfing a month, for a year. The deal applies to computers costing more than $1,000.

Starting Friday, Gateway PC buyers will get 150 free hours of Internet use a month through, the company's online service. Each hour beyond that will cost $1.50.

The plan is part of Gateway's effort to make its machines more appealing by adding Internet features. The company earlier this month started selling PCs linked to a Web site called Gateway My Yahoo, through a partnership with top Internet directory Yahoo. The site offers information and technical support tailored for Gateway PC users.

Gateway unveiled the plan at a meeting with financial analysts in San Diego.

Bloomberg contributed to this story.