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Gateway, iXL venture eyes employee PC programs

The computer maker says it has taken a $150 million stake in the Web consultant's Consumer Financial Network, a maker of financial services and employee benefits portals.

In a push to expand its sales channels, Gateway today said it has taken a $150 million equity stake in Consumer Financial Network, a maker of corporate portals for financial services and employee benefits.

Under the agreement, CFN, a subsidiary of Web consulting firm iXL, said it and Gateway will jointly market PCs, Internet access, financing and other PC-related products and services to companies purchasing PCs and Net access for their employees in both home offices and corporate offices.

The agreement comes at a time when most of the leading hardware makers, including Gateway, Compaq Computer, Dell Computer, Hewlett-Packard and IBM, are searching for different ways to distribute and sell their products in what has become a fairly saturated and cost-conscious market.

Selling PCs through an "affiliate" or benefit program has distinct advantages. Consumers obtain PCs and Internet access for free or heavily discounted prices because employers subsidize the transaction. Concurrently, PC makers lock in sales for hundreds of thousands of units without the heavy marketing expenses that would otherwise be required to reach so many consumers.

Today's deal follows a similar agreement Gateway recently inked with international cosmetics company Avon. Last month, Avon called on the direct PC seller to provide as many as 500,000 U.S. sales representatives with free PCs. The deal could be expanded to offer PCs to more than 2.5 million employees worldwide, the companies said.

Companies such as American Airlines, Delta Airlines, Ford and Intel already offer similar PC programs for their employees. Most programs offer a PC and Internet access for free or for a nominal charge.

Brooks Gray, an analyst at Technology Business Research, said the industry will see more such employer PC deals in the near future, as hardware makers continue to look for additional ways to sell equipment and build longer-term relationships with their customers.

"This is a focus in the industry for hardware vendors because you have (companies like) People PC going and treading on their turf," said Gray. "With this mass-marketing effort to employers, (Gateway) can knock out a lot of potential sales."

Gray said the full extent of Gateway's Avon deal is still unclear, "but the potential is definitely there."

"At least (this deal) will provide Gateway with incremental sales" in the near-term, he said.

The $150 million investment from Gateway effectively reduces iXL's majority ownership in CFN to a minority interest, the companies said in a statement. Still, iXL, which recently closed a $130 million capital infusion in New York-based CFN, will remain the company's largest single shareholder at 48.5 percent.

CFN, which currently operates corporate employee portals for companies such as Merrill Lynch and Delta, also launched, a Web site for marketing financial services and related benefits.

The deal is subject to regulatory approval, the companies said.