Gateway racks up two new servers

The Poway, Calif., PC maker on Monday will launch a pair of new rack-mount servers based on Intel's Xeon processor. Servers are heavy-duty computers used to store data or conduct transactions on computer networks. Rack-mount servers take up less space than standalone machines and are easier for information technology departments to maintain, according to manufacturers.

Gateway's new Gateway 955 and Gateway 975 servers will fill out the company's server line, which did not previously include rack-mount Xeon machines, said Scott Weinbrandt, general manager of Gateway's Systems & Networking Products Group.

The Gateway 955 will start at $1,699. A typical configuration, which will include dual Xeon chips and multiple hard drives, will sell for around $3,000. The Gateway 975 server will start at $2,199.

While the new server models bolster Gateway's product line, they also help kick off a broader effort by the company to return to profitability, in part by revitalizing sales to businesses and public sector clients in the United States.

"It's a continuation of our strategy in terms of creating more products for our customers to choose from," Weinbrandt said. But "we're building the new strategy right now. The two products...are the start of Gateway's re-entry into the server market."

The effort to revitalize servers, which are more profitable than desktops, is part of a broader strategy, implemented earlier this year, to bring Gateway back into the black after a string of quarterly losses, Weinbrandt said.

The profitability plan includes two basic elements. First, Gateway has been working to cut expenses and reduce manufacturing costs in order to lower its breakeven point. Gateway closed 76 stores and eliminated 1,900 jobs in March. The company has shuttered a total of 80 stores, including four closed at the beginning of the year.

The second piece of Gateway's plan includes revitalizing its existing computer models and introducing new products in several different categories, ranging from tablet PCs to consumer electronics, the company has said.

To that end, Weinbrandt's Systems and Networking Products Group is working on network appliances and evaluating several different storage products, which it could bring to market later in the year, he said.

Gateway also plans to begin offering Linux as an option on its servers. Right now the operating system is only available on Gateway servers via Gateway's Custom Integration Services. Under that program, Gateway will load Linux on servers at the factory, but charge a $150 fee per machine for the service.

Gateway will also boost the presence of its business products at Gateway stores in the future.

The stores may soon begin stocking the Gateway 955 server, Weinbrandt said, so that potential customers can look the machine over in person.

Gateway aims to offer a competitive price for each of its two new servers, but analysts say the company still faces stiff competition from other vendors.

"I'm not convinced this is the right strategy for them. It will be difficult for Gateway to compete against the high-volume vendors such as Dell Computer in terms of price performance," said Brooks Gray, an analyst with Technology Business Research. "However, Gateway may have the advantage of being...small and focused, if management is truly focused on selling servers along with desktops and notebooks into the small-business community."

The $1,699 Gateway 955 server has a 1U or 1.75-inch thick chassis, allowing up to 42 machines to fit inside a single seven foot tall rack. Customers can add as many as two 3.06GHz Xeon chips, three hard drives and 12GB of RAM. The Gateway 955 also includes two PCI-X slots for connecting to peripherals or other computers.

Meanwhile, the $2,199 2U or 3.5-inch thick Gateway 975 server, also a dual Xeon machine, adds the ability to accommodate up to seven hard drives and redundant power supplies. It also includes six PCI-X expansion slots.

The hard drives in both servers, and the power supplies in the 975, can be removed and replaced without shutting down the machine, Gateway said.