Gateway returns to PC roots

Company discontinues many consumer electronics lines to focus on PCs--and profitability.

John G. Spooner Staff Writer, CNET News.com
John Spooner
covers the PC market, chips and automotive technology.
John G. Spooner
3 min read
Gateway will pare down its line of consumer electronics--at least for a time--as it focuses on getting back to profitability.

The electronics maker, which acquired eMachines in March, is looking to be back in the black by 2005. To that end, it is focusing on cutting operating costs and creating computer products that it can sell in mass quantities. In recent months, the company closed its chain of retail stores and announced plans to cut its staff to 2,000, resulting in thousands of layoffs. Now it's looking at its product lines.

Despite having made some headway in consumer electronics, the post-eMachines Gateway is focusing on the business it knows best. Gateway has been developing new PC models, servers and storage products, leaving little room for other products, a company spokesperson said, though it does continue to work on digital televisions.

Gateway set its sights on PCs, but has added an eMachines twist. As it has said, it is working on products such as a streamlined family of desktop PCs for businesses. The machines will share a number of components, such as chassis and power supplies, a practice that eMachines desktops have used for years. Sharing components lowers manufacturing and support costs.

The company will continue to sell plasma screen and liquid crystal display televisions, but many other Gateway-brand consumer electronics product lines have been shelved. Future versions of Gateway's digital cameras, Connected DVD players, MP3 music players, DLP (digital light projector) televisions and even some of its more unusual consumer PCs, including the Gateway 610 Media Center and the 901 Family Room Media Center, are still being evaluated, a spokesperson said. These items will probably sell out without replacements lined up.

The PCs and DLP TV have already sold out. Gateway is still selling one Gateway-brand camera, as well as its Connected DVD players and DVD recorder and some MP3 players.

A number of PC makers unfurled plans to move further into the market for consumer electronics in 2002 and 2003. Gateway's retreat will give some ammunition to skeptics who said at the time that it would be more difficult than it looked. Japanese executives said such companies did not understand the market as well as traditional powerhouses like Sony.

History hasn't been kind either. In 1997, 1999 and 2000, Gateway, Intel and others entered--and then retreated--from this market.

Gateway is also hoping to use eMachines as an avenue into third-party retail stores that would be willing to carry both Gateway and eMachines brands of PCs. The company aims to bring some new Gateway-brand PCs out for the back-to-school season for retailers to sell alongside eMachines PCs. The company has yet to disclose any PC sales agreements but has said Best Buy will sell some consumer electronics items left from the Gateway store closings.

Gateway--whose new CEO, Wayne Inouye, also ran eMachines--has already seen some success in the PC arena. The company upped its second-quarter revenue estimate to a range of $860 million to $880 million from $798 million, thanks in part to retail sales, the bulk of which were eMachines models. Gateway will report second-quarter earnings on July 22.