Gateway's low-cost Pentium II PC

Gateway, which last week dropped the "2000" from its name as part of a campaign to polish the company's image, marked the occasion by offering a low price on Pentium II-based PC systems.

Today, Gateway introduced a system for businesses with a 266-MHz Pentium II processor, a 4GB hard disk drive, 32MB of memory, CD-ROM, and a 15-inch monitor for $1,499. The company also unveiled a 333-MHz system with 32MB of memory, 8GB hard disk drive, CD-ROM, and 17-inch monitor for under $2,000.

The systems mark the transitioning of Gateway's GP series computers for small and medium-sized businesses entirely to the Pentium II processor, making Gateway the second company to move away from the older Pentium MMX processors in the past two weeks. The company's efforts--along with those of its rival in the direct sales business, Dell--could push to lower Pentium system prices.

As Gateway moves to make over its corporate image with a new logo and updated name, the PC vendor is simultaneously advancing toward an low-cost PC business model. In financial results posted for the recently completed quarter, average unit prices dropped 12 percent to $2,253, compared with $2,558 a year ago. Prices were also down 3.1 percent from the fourth quarter.

Sales volume did increase enough to compensate for the lower average prices, and the company has engaged in new ad campaigns that target its stronghold in the small business market in order to continue to fuel that growth.

Small-business PC sales growth will surge by 32 percent in 1998, outstripping growth in the consumer and corporate markets, according to market research firm Dataquest.