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Gateway turns off the TV

Merger with eMachines and closure of Gateway stores had a lot to do with the decision, analysts say.

PC maker Gateway no longer fancies itself a TV star.

The computer maker confirmed Thursday that it is exiting the business that it entered with much fanfare in late 2002. At the time, Gateway snagged plenty of headlines and attention from rivals when it started selling a plasma TV for $3,000--thousands less than many competitors were charging. The company later added LCD models.

More recently, however, the company has been retreating from its foray into the consumer-electronics market and focusing its attention on the core PC business.

The company's merger with eMachines and decision to close its chain of Gateway Country stores had a lot to do with the decision to get out of the television business, said IDC analyst Richard Shim.

"They said that a lot of their success with the TVs came from the fact that people could go into the Gateway stores and touch and feel them," Shim said. Even if customers eventually ordered them online, being able to check out the TVs in person was critical to the bulk of sales, he said.

A Gateway representative said the TVs and other consumer-electronics gear did not fit in as well with Gateway's new business.

"We had a captive audience with our Gateway-owned stores, and that was central to our CE (consumer-electronics) strategy," said spokeswoman Lisa Emard.

Profit margins have also dropped significantly since Gateway started selling TVs nearly three years ago.

Even as Gateway exits that business, the PC makers that followed its lead remain. Dell has a significant TV business and Hewlett-Packard also has a relatively new lineup of models.

Dell is doing pretty well in televisions, Shim said. The narrower profit margins work with Dell's low-cost strategy. Plus, Shim said, "Their PC market is doing fine, so they are looking for more growth."