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Not just one of the boys

When it comes to name recognition in Gateway Country, Sue Parks is still no Ted Waitt, at least not yet. But her star is rising fast--and so are the expectations.

When it comes to name recognition in Gateway Country, Sue Parks is still no Ted Waitt--at least not yet. But the 44-year-old executive has been thrust onto center stage and asked to play a major role in the computer company's efforts to recapture its lost momentum.

Earlier this month, Parks was elevated to Gateway's senior vice president in charge of U.S. markets, which comprises consumer and business units. Among other things, she is also in charge of extending a pilot program she started to transform the rest of the company's 300-odd retail outlets into what it has taken to calling "technology resource centers." These retail locations--regular folks can still come in, kick the tires on a machine and place orders--also serve as hubs for sales, service and marketing teams as Gateway struggles to transform itself into more than a box pusher.

Parks, who is being touted by insiders as one of the fast comers at Gateway, made her mark at the company running the Gateway Business division: Unit sales in the first quarter grew at a 15.7 percent clip, and the group's "beyond-the-box" sales comprised 23 percent of total revenue--both percentages sharply up from a year earlier.

If the Rockford, Ill., native has any additional rabbits to pull out of her hat, this would be a good time to do it.

With the stock trading at just about $10 a share, down from its 52-week high of $69.88, Gateway is under pressure to prove it can turn the corner. And skeptics abound.

The company remains a bit player in the corporate market, thus cut off from the sorts of customers that would presumably be of a mind to sign up for juicy service contracts. And in the midst of a price war, demand for PCs is not climbing fast enough to offset the concomitant margin decline.

Still, Parks remains convinced that there's more than enough business--in service and elsewhere--being left on the table by the competition. And she has some firm ideas about how to leverage Gateway's outlets to gain an advantage over the company's rivals. Parks chatted with us in an interview shortly after her promotion.

Q: Intel's rumored to be taking the hatchet to its chip prices. What about PC pricing: Do you see a point beyond which nobody's going to drop because it would just be suicidal?
A: We'll always be focused on what goes on in the market. We want to present customers with great value--not just for the PC, but around solutions. We have a different story to tell, and the beauty of what we're doing is that local presence. What I learned in business is that people are conscious about how they spend their dollars, but also on service and support.

You've got a lot on your plate now. What are your top agenda items for the second half?
Why we're so excited is we announced we will pull together the consumer and business units into one U.S. markets organization. So we will be able to take a great brand that transcends consumer, business, education and government and go to market on a local basis. When people wake up in a market, they wake up as a consumer...We have an obviously powerful brand nationally but can deliver them locally.

You have about, what--300 retail points of presence right now?
Yes.

When Gateway opened its first Country store in September 1996, it received a fairly cool reception from Wall Street. But on the whole, the business has done relatively well.
We have had wonderful success with our stores with people. They can come in and feel and touch and talk with people who know what they are talking about. When I came on, we had just started getting the business team involved with the stores.

Was there a problem of bifurcation? That is, you had two separate sales groups with two separate sets of interests.
Some might have felt separate. There was the compensation issue, and you had different groups delivering different messages. We weren't as integrated as we could have been.

You closed about 10 percent of them earlier in the year. Are you still evaluating whether you need to tweak that coverage, or is this the number that you want?
I think we will always be evaluating our stores and programs as to whether we need them or not. If you ask me today, or 10 months from now, we will always be looking and evaluating and making appropriate changes as markets change.

In the last quarter, your beyond-the-box sales of intangibles such as training, education and maintenance accounted for 40 percent of Gateway's net income and 18 percent of overall revenue. Given your growth plans for that business, will Gateway be morphing into something other than a box maker five years from today?
Absolutely. We see ourselves becoming the technology solutions provider for targeted segments: consumer, small and medium, education, and local government. We have a unique value proposition because of our national brand and the fact we can really deliver on an integrated, local basis. We view ourselves as being the IT department for all those entities.

But you also have a challenge in that your consumer customers aren't normally the sort who would demand these types of services.
I'm really trying to get us focused. Nobody's done a great job serving small and medium-sized businesses. I believe we have the infrastructure to help our customers from the consumer on up to the business. In addition, we know that a lot of people don't know how to make the best use of technology available to them.

Of the segments served, which one or ones do you envision becoming the biggest customers for Gateway services?
I see the consumers. I also see the small and medium-sized businesses. And when you talk with educational institutions, they'll tell you they can't maintain something to the extent of an IT department. In the last couple of years, our beyond-the-box revenues have grown because we enable people to do more with technology. What we're going to do is accelerate on that.

So why go to the effort and expense of maintaining local outlets?
Part of the reason for getting really local is that we see our stores as being a wonderful avenue for people to come in and learn about compelling solutions. Whether digital photography or networking, one of the hardest things is that they hear about things but can't touch them, can't see them. We have the ability to demonstrate like no one else. We have a different story to tell, and the beauty of what we're doing is that local presence. We can work with them over the phone or, depending on the segment, see our customers in person.

Is there something larger going on here? You have Dell pushing into networking. Compaq is getting hard-core about services; in fact, that was the only bright spot in its business the last quarter. And now you folks are doing the beyond-the-box thing. In other words, does it mean that the days of the pure box pushers are numbered?
I would say it would be very difficult if you were just focused on the box because our customers are looking for value--how technology can improve their lives--and not just technology for technology's sake.

How vital is the release of Windows XP to future sales of Gateway computers?
It's very important. We're very excited about using our best assets--the stores--where we can do things like hold training sessions (for XP). Certainly, in terms of upgrading people's systems, we'll be doing that on a local basis. I think we'll have a lot of fun.

Speaking of XP, how will you feature Windows? Will it be a Microsoft start-up screen that comes up first or a Gateway logo?
Our solutions group is working through all those issues.

OK, a different subject. Unit shipments at Gateway were down 16 percent in the second quarter, according to Gartner. And you remain fourth, behind Dell, Compaq and HP. A couple of questions: First, if Dell is able to exploit the direct-sales business plan to quickly respond to market changes such as falling component prices, why wasn't Gateway able to do so as well?
Well, I've been in this job a whole week. (Laughing) On the business side, we grew 27 percent in units, and that's terrific growth. I'm not going to speak about Dell's growth, but if you look at the segments where we've taken this path, we've seen lots of success.

A follow-up: Part of Dell's success has been its focus on corporate sales, which allowed it to cut prices without trimming its margins to the bone. Why hasn't Gateway been able to get a similarly strong foothold in the business market? Only about one-third of your revenue comes from sales to corporations.
I think what Dell did early on is focus on business companies and the enterprise space. Gateway has a wonderful brand with consumers and small and medium-sized businesses. We have an opportunity to strengthen those ties. I don't see us going after enterprise businesses. I have a group of people focused on strategic accounts, but we're focused on those accounts that already have commitments. I'm really trying to get us focused. Nobody's done a great job serving small and medium-sized businesses.