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Gateway shaves prices on PCs

The PC maker, fresh from narrowing its second-quarter loss, is offering $100 mail-in rebates on a pair of desktops and the Solo 1450SE notebook.

Gateway is turning up the heat on the competition with some summer PC deals.

The PC maker, which yesterday narrowed its second-quarter loss thanks to aggressive pricing, introduced the deals on Friday.

Gateway said it will offer $100 mail-in rebates on its namesake 300SE and 500SE desktops and its Solo 1450SE notebook, dropping prices to $599, $699 and $999, respectively. The Poway, Calif.-based company will promote the deals on its Web site and via a new ad campaign that targets back-to-school PC buyers.

PC makers are increasingly using rebates and promotions--such as Dell Computer's Stephen character, who has become famous for saying, "Dude! You're getting a Dell!"--to help them reach certain price targets and to entice customers to buy. The $100 rebate on the Solo 1450SE, for example, shifts the notebook into the sub-$1,000 range and, the company hopes, makes it more appealing to back-to-school buyers.

Gateway is also using the rebates to increase pressure on its competitors--in particular Hewlett-Packard and eMachines, two big retail PC sellers, and Dell, its direct-sales rival.

The Gateway 300SE includes Intel's 1.4GHz Celeron processor, 128MB of RAM, a 20GB hard drive and free upgrades to a CD-Rewritable drive and a 17-inch monitor. The machine usually includes a CD-ROM and a 15-inch monitor.

The Gateway 500SE adds a 1.8GHz Pentium 4 but is otherwise configured the same as the 300SE.

In comparison, Dell's Dimension 2200 PC, when configured with the same options as the 300SE on the Dell Home and Home Office Web site, sells for about $800.

Gateway's discounted Solo 1450SE notebook includes a 1.3GHz Celeron chip, a 14.1-inch screen, 128MB of RAM, a 20GB hard drive and a DVD drive. It sells for $999 after the rebate. Customers can step up to the Gateway 1450LS, which offers a 15-inch display and combination CD-RW/DVD drive, for $1,199 after a rebate.

Gateway is also bundling Microsoft's Office XP software for students and teachers who purchase certain PC models, such as the company's 300S desktop. The $899 machine incorporates a 1.8GHz Celeron chip, 256MB of RAM, a 40GB hard drive and a CD-RW, and a 17-inch monitor.

Gateway's new ad campaign will be more product-focused, Gateway CEO Ted Waitt told analysts during the company's Thursday night second-quarter earnings conference call. Gateway narrowed its second-quarter loss because of an increase in unit sales, which it attributed to aggressive pricing.

Where current ads have promoted certain aspects of the company, such as Gateway's new Platinum PC design, the new ads will focus on products and encourage customers to visit Gateway Country stores.

Although Gateway intends to outprice its rivals with these new deals, it's unlikely any of them will stand still.

Dell, for example, is known for its aggressive promotions, that range from free shipping to mail-in rebates, to promote its PCs. HP has already stepped up its rebates this summer, and analysts expect the deals to keep coming as the company clears out excess inventory.