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Gateway stores to sell digital goodies

update The PC maker looks again to home entertainment, as it stocks store shelves with digital cameras and music players, and prepares to release a 42-inch plasma TV.

update Gateway this week will put more emphasis on home entertainment, as it stocks store shelves with digital cameras and music players, and prepares to release a 42-inch plasma TV.

The PC maker made the announcement on Monday, two days before revealing third-quarter sales figures.

Gateway has sold cameras, video recorders and other consumer-electronics products for some time on its Web site, but by stocking these items in its Country Stores, the Poway, Calif.-based company hopes to nab impulse buyers. The company already sells a limited number of PCs in its stores. Earlier, consumers could go to a Country Store and order products for delivery, but not cart anything home.

"That's been a very important strategy for us, to have some PC models on hand for people to buy," Gateway spokesman Brad Williams said. "All of these new items will be available on a cash-and-carry basis as well."

Gateway plans to carry about new 150 items in its retail stores.

In a related announcement, Gateway plans to unveil a 42-inch plasma TV on Nov. 4, as it once again makes a big move for the living room. The plasma TV will mark Gateway's second foray into home entertainment. In 1996, the computer manufacturer released the Destination PC, a home computing/entertainment system that sold with only modest success.

Gateway would not disclose pricing for the big-screen TV, but Williams said that it would be "very competitive."

In some ways, this is a back-to-the-future strategy. In November 2000, Gateway announced it was going to begin to make a variety of branded consumer-electronics products that could include phones, speakers, video gateways and Web tablets. The company planned to team with AOL and Broadcom to bring these products out.

Although Gateway was one of the first major PC makers to announce a "digital hub" strategy for turning the PC into an entertainment center, it was also one of the first to quit. In January 2001, then CEO Jeff Weitzen and most of Gateway's upper management were forced to resign. Ted Waitt then resumed the position of CEO and cancelled the hub-related projects. Intel, Dell Computer and other PC companies terminated consumer-electronics products as well. Only Sony and Apple Computer have made much of a dent in this area.

Touch me
Through demonstrations and in-store customer training, Gateway also hopes to help consumers avoid common problems in using digital devices.

"If you put Epson high-quality print paper in an HP printer, bad things happen," said Dave Turner, Gateway's senior vice president of sales and marketing. "All the blues show up as greens, and all the oranges show up as reds...We want to make sure these bad things don't happen to our customers."

Gateway isn't the only direct-PC maker looking to expand into devices. Dell is moving into printers and also plans to release a Pocket PC handheld next year.

"Gateway is conducting a pre-emptive marketing strike to attract consumer attention going into the holiday season," Technology Business Research analyst Brooks Gray said. "It's good timing, and Gateway's local exposure is a critical differentiator versus Dell. Many of the new peripheral products could be very enticing for shoppers looking to enhance their existing PCs."

ARS analyst Toni Duboise praised Gateway's strategy shift, but she issued a cautionary note.

"They're going to have to promote it to drive traffic into stores," Duboise said. "They've got some stiff competition from Best Buy, CompUSA, etcetera. Saying, 'We've got digital stuff' is not groundbreaking. They're going to have to spend a lot of money to drive it."

Gateway has plans to heavily promote the digital-device strategy, including using Sunday newspaper inserts such as do Best Buy and other retailers.

Big-screen wonder
Analysts were much more cautious about Gateway's move into big-screen TVs. They cost quite a bit, so the volumes are relatively low, although growing rapidly.

Sources close to Gateway's product strategy said the company's Plasma TV would sell for about $3,000. Williams wouldn't comment on the price.

Still, Gateway is moving into the market at the right time. Even with their high-ticket price, Plasma TV sales are increasing. Year to date, sales are up 200 percent compared with the same period a year earlier, according to NPDTechworld. On average, retailers sell about 3,000 units a month.

"There's obviously a lot of opportunity," NPDTechworld analyst Stephen Baker said. "It's a small market right now because the pricing is difficult...(but) the trend is certainly toward bigger televisions."

News.com's Michael Kanellos contributed to this report.