Gateway's uncertain future?

Yikes. This is a bit alarming. It would almost give me pause in purchasing a Gateway product if Best Buy didn't carry a warranty for it. If what analysts are predicting is accurate, neither option sounds very good for Gateway since reports indicate that Lenovo's level of quality in their first machines is seriously below par compared to IBM's. They're also having big trouble fulfilling customer orders from what I see here on the forums. And I have just never liked Acer's build quality.

 

Despite owning a Thinkpad, I really can't say much about their future plans, but do want to make a point that new product almost always has bugs during the first couple months of production. And it is usually also best not to buy the first model in a series.

Regarding Gateway, Rick Snyder is a really good guy, and ran the company during its best times in the mid 1990s. Rick left on his own back then--he just wanted to do something different. But I don't know if even Rick Snyder can save Gateway now.

The overall Gateway story is this: cheap Midwestern labor, low real estate costs, low taxes, etc., combined with Waitts marketing skills built the company back in the 1990s. Unfortunately, Ted let this go to his head, and moved the headquarters to high priced California, plus opened a chain of 300 or so brick and mortar stores. This put Gateway's expenses through the roof, and when the industry suffered a downturn in 2000, Gateway could not match Dell's low prices. Ted hoped a move into consumer electronics would save the company, but this really just made everything even less efficient.

Inouye closed the retail stores and ended manufacture of everything--Gateway now buys everything from Chinese and Taiwanese manufacturers, and contracts all tech support out to the Philippines and India. This did bring their cost structure into line, but at the expense of an enormous drop in market share, plus a certain amount of trashing of the brand name (due to product problems, support screw ups, etc.) that occurred beginning in 2000.

So, Gateway is left with a trashed brand name, undifferentiated product, and low volumes which do not produce the economies of scale such as Dell has.

While the company might survive more than a year or so, or even prosper, I would not count on it. Additionally, there really is very little reason for another company to buy Gateway--simply because there is nothing to buy. All Gateway really consists of is a trashed brand name and a beaten management team.

The only bright spot I see is that Dell has probably reached the limits to growth. I figure Dell pisses off as many old customers as they create new ones, and these pissed off old customers have to buy their computers somewhere.

 

That's sad. I was just looking at Gateway stocks, and they are down to about $2.50 per share, versus Dell's and HP's $30.00 shares.
While I was browsing their stocks, I came across a 'web cast' that was broadcasted Feb. 9th. On Gateway's Press Releases page, they gave a link to it, but it is dead. Does anyone know where I could find this? Or even just a script would be fine.
Thanks.

 

It is sad. Seeing that story prompted me to do some research into the company's past. Gateway's history seems to be riddled with missteps and "might have beens". If it weren't for those periods of poor leadership that Spiff mentioned they might very well still be in the top three today.

 

The conference call link is:

>> http://audioevent.mshow.com/287814/ (the link works)

You have to register, but no biggie (plus it's free).

About Gateway, I personally think if they really focussed their attention towards superb customer service, they might be able to actually win customers who are otherwise alienated by all the other major comptuer manufacturers with subpar to poor customer service.

It's really difficult in the commoditized computer world to really differentiate yourself amongst the competition. GTW copied Dell when they took the consumer electronics approach, and that was a pretty big flop. They've tried to push their product out into retail chains in a big way (like HPQ) and they've faced a big squeeze there as well.

I don't think their brandname is really tarnished beyond repair, but it's more forgotten than anything else...people just don't can't define Gateway like they can Dell (cheap, semi-reliable PCs), IBM/Lenovo (well-built, well-supported [costly] business machines) or Hewlett-Packard/Compaq.

Luckily they have their nice cash cushion to help them through another internal restructuring, but the clock is definitely ticking away for them.

 

Actually, Gateway entered consumer electronics before Dell. Dell is the copycat. Really. In general, Gateway did innovate, while Dell would hold off doing something until they knew they could do it successfully. Regarding retail stores, Gateway's push into Best Buy and Circuit City was necessary to maintain a retail presense back when they closed the Country Stores in early 2004. Retail sales currently aren't bad, they just aren't particularly profitable.

Aside from the California headquarters and the Country Stores (which Waitt hoped would become "Community Centers") another example of over reach that Ted Waitt suffered from in the late 1990s was Gateway's theme: "Humanizing the Digital Revolution". In principle, not a bad concept for Microsoft, but more than a little grandiose for Gateway.

Unfortunately, lots of companies say this, but when they need to improve the bottom line, service and support are the first things to go. Making a quality product tends to get lost at the wayside also. For these reasons, I tend to fear buying a product from company that is losing money.

 

Don't know how helpful that will be considering they're also $350 million in debt.

 

All iv gotta say is im on my girlfriends new gateway and it kicks ass! Its the GT5032, 4200+ athlon 64 x2, 1 gig ram, all the media stuff...i installed a 6600 and im running DVI to this gateway HD 21" LCD with 8ms response, picture within picture, component input, 4 port usb hub, 90 degree rotation, up and down adjustment, 1000:1 contrast. This thing is sweet and the dual core is so fast I used dvd shrink to copy a whole movie in 22 minutes, while doing other stuff on the computer and it was fast like i had nothing else running! Woooo

 

Thanks for the link, n00b. I don't know why it didn't work for me

 

Sorry to just storm in here (a newbie myself), but I couldn't help but come into this thread since it was something that I was thinking about myself.

All of you bring up some good points in this thread. Personally I think that Gateway DOES indeed have a chance at survival, particularly since it does have the cash (mach mentioned the debt...but it's not like ALL of their creditors are going to call in their loans at the same time, so it's highly unlikely that they'll face a cash crunch immediately...plus they likely have some lines of credit they can easily tap).

As for customer service, I believe that it CAN be used as a selling point, but the only problem with that is that once the company's sales don't hit internal targets, it'll be one of the first things to be cut and we'll be back at square one again which would suck.

Anyways I wish Gateway the best of luck. It'll be interesting to see what happens to the company in the coming months.

 

Actually I would think that if their creditors got nervous enough about Gateway closing it's doors that they would be inclined to all jump in at once before GTW filed bankruptcy and said "adios", since it's kind of hard to collect from and entity that no longer exists.

 

I'd have no problem buying a Gateway desktop--in fact, from my signature, you can see that I did.

And I really do wish Gateway all the best of luck. Truly.

Regarding their products, especially notebooks, more and more Gateway really does no engineering itself. They just pretty much pick and choose from what the Taiwanese notebook makers have available, have it rebranded, and sell it. Some of their product is very good, some less so. Ultimately, you really need to know the ODMs, read the reviews, and go inspect the models for yourself.

 

Interesting contrast. The same day Inouye stepped down, apparently Gateway sealed this deal with the state of Tenessee. Perhaps, as Mark Twain said, "The rumors of my demise have been greatly exagerated".

 

if i recall correctly, the california HP bought about 3000 a few months back

 

Right you are. After reading around on some other sites such as Forbes and Business Week it turns out that they have other contracts with California state government and also with New York state.

 

i know companies that buy just gateway and are serviced by them too. I dont know what is holding them back.. i mean they own emachines too which is thriving last i heard... Seems like if they were to come out with somethign revolutionary or just cool is would boost sales big time. We sell a bazillion gateways machines at work, and now that our gateways have amd dual cores and we have 2 machines with 2 gigs of ram... even more. Their laptops are a big seller too. We prob have more gateway notebooks than hp/compaq or toshiba.

 

After all the reading I've done into Gateway's background, I think I know why that is. It seems at one time that Inouye was a big cheese at Best Buy, so it isn't hard to imagine that he probably had some connections that facilitated making them the largest mover of Gateway's retail products.

I don't know what's holding them back, either. From what I understand they were actually profitable (although not huge) for the last 3 quarters. It seems, though, that their earnings did not meet analyst's projections so they adjusted their rating from "outperform" to "underperform" earlier last year, hurting their stock prices.

I fell like there is a better than average chance that they can rebound, but only time will tell.

 

I can back up the idea that Gateway sells a lot at BestBuy. Just today, I was at bestbuy and spent maybe half an hour in the notebook section. In that time, I saw 2 Gateways be purchased (7525 and the Turion one). No other computers were purchased while I was there.

Uscooper, I have been eyeing the Gateway with the Dual Core, and it is no longer at BestBuy. Not on the site, or in the store. I asked an inventory guy, and he said that they do not carry any. Is it just my bad luck, or are they no longer selling it?