The Irvine, Calif., PC maker on Thursday will begin offering configurable desktop PC models directly to consumers, resuming a practice it abandoned in 2003, when it launched its effort to become a consumer electronics brand.
Gateway will offer three new desktops, which start at $499 sans monitors, and give customers the ability to configure any model to their liking and their budget, rather than forcing them to pick between several preconfigured PCs. Gateway will even allow its least-expensive PC, the Gateway 3200 series, to be configured with a wide range of options, including DVD burners, said Rick Schwartz, a senior product manager at the company.
"If you want to buy a $499 PC and trick it out, you can do it now," he said.
The PC maker, whichin an effort to beef up its PC sales, aims to but wants to strengthen its traditional direct-to-consumer business as well by bringing back the configurable PCs. The machines will be presented with suggested configurations on Gateway's Web site. However, customers will be able to customize them by adding, deleting or changing most of their components.
The company's suggested configuration for the Gateway 3250S desktop will include a 2.66GHz Intel Pentium 4 505 processor, 256MB of RAM, a 40GB hard drive, a CD-ROM drive and a 17-inch CRT monitor for $599.
For the midrange Gateway 5200X, the company will recommend a 3GHz Intel Pentium 4 530, 512MB of RAM, a 120GB hard drive, a multiformat DVD burner and a memory card reader, as well as the 17-inch monitor, for $949.
The high-end Gateway 7200X will list with a 3.2GHz Pentium 4 540, 512MB of RAM and a 200GB hard drive, as well as the multiformat DVD burner, a memory card reader, an ATI Radeon X300SE graphics card and a 17-inch LCD. The 7200X's starting price is $1,249.
Gateway will offer the machines with so-called cost-based upgrades, meaning that instead of charging the highest price that the company thinks the market will bear for each item, it will charge a smaller price and pass on its discounts to customers. Hard drive upgrades will range in price from $10 to $25 and processor upgrades will cost $10 to $15. Thus it might cost $25 to move from an 80GB drive to a 120GB drive, Schwartz said.
Although Gateway plans to offer low-priced upgrades, it will still face stiff competition for consumers from both Dell and Hewlett-Packard. Dell Dimension desktops start at about $400, while some HP Compaq Presario desktops start at prices as low as $323 after rebates.
To that end, Gateway will aim to provide a better value by throwing in free shipping on most of its PC models and offering other freebies over time.
Then, "as we move closer to the holidays...we're going to get a lot more aggressive with our promotions," Schwartz said. "You're going to see us doing the crazy stuff that everyone else is doing--free LCD upgrades and things like that. The new (post eMachines acquisition) cost structure is so much better. We have a lot more room to work in terms of the margins."
Gateway might also offer something Dell hasn't yet. Over time, Gateway will deliver a wider selection of desktops that include Media Center PCs and game systems, some of which Schwartz hinted might incorporate Advanced Micro Devices' processors. While Dell offers game systems and Media Centers, it does not offer AMD processors in its PCs.
"I wouldn't be surprised to see AMD again from Gateway. For something like a gaming PC, (we) need to look at it seriously," he said. But "Intel has some very exciting technology on its road map" as well, he added.
Gateway's eMachines armand Athlon 64 chips in its desktops and notebooks. But Gateway-brand PCs have been based exclusively on Intel chips since Gateway in 2001.