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Gateway forms alliance for Net marketplaces

The computer maker says it is forming a partnership with to develop online marketplaces for small and midsized businesses.

Gateway today said it has formed a partnership with online marketplace builder to develop online marketplaces for small and midsized businesses.

Together, the companies will develop three global marketplaces that allow clients to buy and sell products and services over the Web. Las Vegas-based PurchasePro, which launched four years ago, will create Gateway marketplaces for the computing giant's small and midsized corporate customers in the United States, Europe, Middle East, Africa and Asia-Pacific regions.

As part of the deal, Gateway marketplace customers will have access to a public exchange hosted by PurchasePro, which encompasses some 30,000 businesses including America Online, Sprint, Hilton and others. PurchasePro, which targets companies of all sizes, said access to its network of marketplaces will let small to midsized clients enjoy the purchasing clout and potential discounts typically extended to larger companies.

Financial terms of the deal were not disclosed.

Online marketplaces, or trading exchanges, have become popular with many companies and within specific industries because they are thought to help cut costs through improved price and inventory management.

A number of PC makers, including Gateway and Dell, have joined the dash to set up business-to-business exchanges. In a similar deal, Dell in March linked with e-commerce software provider Ariba to create an online marketplace for Dell's small and midsized customers, also linking businesses to the Ariba network.

Today's move marks a significant win for PurchasePro. Gateway, after all, is one of the strongest PC companies in the small-business market and has been one of the more aggressive companies in devising new services that can be coupled with a PC sale. In a research note, Lehman Brothers analyst Pat Walravens called the Gateway deal "promising" for the company.

Because PurchasePro hosts its software via a typical application service provider (ASP) model, the company will most likely nab recurring revenue from Gateway thorough maintenance fees and hosting fees for the marketplaces, he said.

In addition, the training initiative outlined in the agreement will help PurchasePro address the top challenge most marketplace builders face: driving the usage on their marketplaces, said Walravens, who reiterated his "buy" rating on PurchasePro's stock. As part of the agreement, Gateway will use its Country Store retail outlets to train as many as 70,000 companies per year to use online marketplaces.

"During the second quarter of 2000, of PurchasePro's 25,000 companies, about 7,500 sent or received a bid and about 3,500 sent or received a purchase order," Walravens said in the note. "That leaves a lot of companies who are not transacting on the system. The Gateway alliance should help PurchasePro educate its members and drive usage of the system."

Gateway customers will also be able to access the joint marketplaces through an icon that will be featured on its PCs designed for small and midsized businesses. The icon will take people directly to the marketplaces.

Gateway's first eMarketplace is operational and will be officially launched by mid-November, the companies said in a statement.