Gateway changes its stripes

The PC maker is putting on a new face to reach out to businesses as it tries to maintain its down-to-earth image with consumers.

3 min read
Gateway is putting on a new face to reach out to businesses as it tries to maintain its down-to-earth image with consumers.

Yesterday, the company dropped the "2000" from its name and freshened up its logo against a backdrop of a new advertising campaign targeted at small businesses and a restructuring aimed at large corporate customers.

"One of the reasons we launched a new logo is basically because we are refining our strategy," said Jeff Weitzen, president and chief operating officer president for Gateway. Weitzen, who recently joined the company after serving as executive vice president of AT&T's business markets division, is responsible for directing Gateway's sales and marketing divisions, manufacturing, engineering, and worldwide business operations.

In the near term, the small business market is still likely to be the growth engine for the South Dakota company. PC sales growth will jump 32 percent in this area, outstripping growth in the consumer and corporate markets, according to market research firm Dataquest. The company has launched new ad campaigns that target its stronghold in the small business market to try and harness this growth.

Other analysts have pointed out that this is an extremely viable strategy because as Gateway's small business customers grow in size, so do its sales to these customers. In addition, there are many more potential customers at small businesses than in corporate America.

While Weitzen noted that Gateway is reinforcing the buy-direct model for small and medium-sized businesses, he added that the company is also working to address the needs of large corporate "enterprise" customers.

The move into the market for large corporate accounts is important for Gateway because the company is now trending toward a 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. Corporate customers could help offset those trends with volume purchases of higher margin notebooks, servers, and workstations, as well as increased volume in desktop PCs.

So far, the move hasn't met with a great deal of success. Companies like Compaq Computer, IBM, Hewlett-Packard, and Dell already are well entrenched in corporate accounts.

Compounding Gateway's challenges, some companies such as Compaq are facing a glut of business systems and are trying to dump them at low prices, making it that much harder for Gateway to push aggressively into this market.

Other challenges are rooted in the product mix. "They realize they need to diversify in terms of products, as well as geography. Eighty percent of units sold in the most recent quarter are desktop PCs sold in the United States," said Kevin Hause, an analyst with International Data Corporation.

Analysts note that it will take some time to get corporate buyers to pay attention to market newcomers. To help attract new customers, the company has launched of a new program to sell its products through value-added resellers (VARs), in addition to selling directly to customers.

The Gateway Partners program is the channel sales and marketing arm of the Gateway's new business division, which is headquartered in Irvine, California. The company said it intends to partner with VARs that can deliver services in corporate environments that demand continuously available computing resources.

"Gateway Partners is addressing the business market...We can't serve unless have you have the right partners," Weitzen said. Gateway is partnering with VARs who are doing things like system integration and installation of software for vertical markets, "things that are extremely important to clients that we can't deliver ourselves."