Hoping to bolster declining revenues and slipping market share, Gateway announced that it will market digital projectors to the SMB (small andmedium business) and education markets. Digital projectors represent a newand heretofore untested product line for Gateway.
Gateway is the fourth-largest computer maker and has struggled to remain oneven ground with its competitors. The company has announced three significantrestructuring plans since 2000, the latest announcement coming on March 17th,when it revealed that plans to eliminate 1,900 jobs, or about 17percent of its workforce.
At the same time, the company revealed its intention to close 80 Gatewaystores — company-branded retail outlets that sell only Gateway products.Shuttering the stores will save the company an estimated US$400 million.
The latest round of layoffs brings to about 10,000 the number of jobs cutfrom the company in the past two years in attempts to improve cash flow. Thestore closings reduce to about 190 the number of remaining Gateway outlets,down from a high of 350. Gateway sells computers online, but itsbranded-store initiative competes with Dell’s industry-leading online retailoperation.
Diversification Emphasis
Gateway’s restructuring efforts have emphasized diversifying in at least twobroad ways: from the consumer marketplace into the business marketplace, andfrom PCs to a broader range of devices. The move into digital projectorsencompasses both initiatives.
Gateway began selling flat-screen televisions and digital cameras last yearin the consumer arena.
“Gateway has been trying to diversify their product portfolio for some time,because they’re getting killed by Dell’s direct channel model,” Ryan Jones,senior analyst with the Yankee Group, told the E-Commerce Times.
He also noted that when it comes to Gateway’s business needs, thediversification into projectors is neither consumer-centric norbusiness-centric. “In terms of their target audience, they’re not particularwhether it’s business or consumer, they’re just looking for a differentproduct,” Jones said.
Short-term vs. Long-term
While Jones believes the company’s explorations in new markets “could saveGateway,” other observers see such dabbling as a short-term solution atbest.
“This, along with their movement into plasma TV, has a chance to juicerevenues in the near term,” Joe Beaulieu, senior stock analyst forMorningstar, told the E-Commerce Times. “I’m not sure it represents a viable long-termstrategy. They seem to be grasping at straws.”
Reducing the retail load might vitalize the company’s balance sheet andbring it to a stronger position against Dell, even as it reduces Gatewaysvisibility in the retail space. “Getting rid of that base of retail storeswould put the two companies on an even footing,” Morningstar’s Beaulieusaid.
“Some retail presence makes sense, as a way of reaching customers thatwon’t buy online. I would be very surprised if Gateway closed all of itsstores. TVs and projectors must be used to generate short-term revenue while theyretool their PC business,” he added.
Two Models
Gateway’s nascent projector line will include two initial models. The 205SVGA emphasizes portability, and the 210 XGA provides additionalconnectivity options (wired and wireless) for in-house use. Prices willrange from $1,399 to $2,548 for a fully enhanced Model 210. Both units weigh 3.5 pounds and they have similar dimensions.
Gateway has contracted an unnamed electronics manufacturer to build theprojectors.
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