Lacking a Strong Message
Industry observers say that, on the retail and consumer side, Gateway is in terrific shape. However, on the professional side, the company is lacking a strong, coherent message. Can you talk about your messaging on the professional side of the business? I think our message is being fairly well-received. I dont have as much air cover as Id like in terms of impact, but I think if you talk with customers or talk with consumers on the professional side about their hierarchy of needs, their first is to have a great product, [and] especially as we become a more mobile society, a great notebook product.Step two is very simple: Your brand is built on the after-purchase experience. How good is your service? How reliable a provider are you? We have made continuous strides and improvements over the past year in terms of providing better value and service for our customers. Step three goes back to the first step of our overarching strategy, which is, youve got to have competitive price points. We provide great value because weve driven a lot of cost out of our business. We pass those savings on to our customers. So with great products and greater service at a great price, youve got a compelling value proposition. Once you have that, you get to the fourth point, which is that affordable customer intimacy. Youve got to know your customer needs. The good news for Gateway is that we have a significant number of sales associates who have been managing and working with the same clients [for] five, six, seven, eight, 10, 12 years. They understand the client needs. They understand what clients are looking for, even before they know what they want. So were in a position to create value there. Its probably our biggest differentiator in terms of that customer intimacythat knowledge and customer intimacy that our sales reps have been able to build over time. That message gets out pretty consistently, and frankly theres a vast number of Gateway customers who are tremendously loyal to us, that really want to see us win. Theyve bought from us for 10 years or more and are very happy with our products. In fact, as they look at our future products, they go, "Wow, this is better than anything weve ever seen." How close are you to Dell in the area of cost structure? Overall, we are already under Dell. But if you break apart our businesses, we still operate on a higher cost structure on the professional side, which means we still have to get down a little bit, so we should be able to compete head-to-head with them. Overall, we leverage all the shared services within the company, and it allows us to take lower margins in the area of professional to remain competitive. Regarding services, can you talk about their importance to your professional business, and what your plans are in this area? Services are absolutely critical. Hardware margins will continue to erode in this business, so the question is, where do you find your profit pools? There really predominantly are two areas. One is services. The other is software peripherals. Next Page: "The Box and Beyond."
We have a great notebook product with our M460, the one we just announced. Well be upgrading our Tablet [PC] in August, so in the area thats the highest growth in the industry, weve got leading-edge products. Thats step one of our message.