Gateway Makes SMB Push

Company branches out with new hardware, services and support for SMB customers.

For a CEO who had just announced more rocky financial news, Gateway Inc.s Ted Waitt was upbeat and optimistic. The Poway, Calif., company had just reported a $139 million third-quarter loss, with revenues off by almost $200,000. But Waitt was even more enthusiastic than he usually is in such situations.

"Were now a completely different and stronger Gateway" than six months earlier, Waitt told analysts and the media late last month.

Gateway is six months along in its efforts to expand beyond its PC manufacturing roots and remake itself into a branded integrator, a company that offers not only a wide variety of products on both the enterprise and consumer sides but also the technology, services and support to make all these products work together.

And the transformation has come with a deluge of new products, including 72 offerings in 16 categories since May—58 alone in the third quarter, with another 50 due by years end, according to officials. The flood is continuing: At an event last week in New York, Gateway unveiled two notebooks and announced that it had completed remodeling its almost 190 Gateway retail stores across the United States. This week at Comdex in Las Vegas, Gateway will roll out a host of storage products, as well as systems management software and support for SuSE Linux AG.

All this is part of a larger strategy to make Gateway the technology choice for consumers and SMBs (small and midsize businesses)—from which the company derives about 50 percent of its revenue—government agencies, and educational institutions.

SMBs are important for Gateway. A key reason for remodeling the stores—about 40 percent of Gateways revenue comes from the stores, officials said—was to make room for enterprise products such as servers. In addition, Gateway recently hired Jocelyn Attal away from IBM to become executive vice president of the companys professional division, which includes focusing on the SMB market.

"The take-away is that we want our customers to ask us for anything in their technology needs, and we will supply it," said Scott Weinbrandt, general manager of the systems and networking products group and a 10-year veteran of Dell Inc. before joining Gateway in January as part of a management make-over.

Its difficult to say how the transformation will work out for Gateway. The company has had only one profitable quarter since the third quarter of 2000, and PC sales have declined. But Gateway officials are optimistic, and some enterprise customers are encouraged by what they see.

This week at Comdex, Gateway will continue pressing ahead with new products as it rolls out several storage devices, including the 840 SATA JBOD, a direct-attached storage offering with Serial ATA drives, and the 860 NAS, a 1U (1.75-inch) box that can house four Serial ATA drives. In addition, the company will jump into the storage area network space by offering the Thunder 9500 series from Hitachi Ltd.

Also at the show, Gateway will unveil its Gateway Systems Management software, the result of a partnership with LANDesk Software Inc. that will give users a single console through which to control their servers, storage, desktops and notebooks, according to Weinbrandt.

The new software will replace Gateways Server Management software, Weinbrandt said, and will snap into the most popular management software, such as IBMs Tivoli, Hewlett-Packard Co.s OpenView and BMC Software Inc.s Patrol.

NSL Analytical Services Inc. is a small chemical testing lab with growing technical needs and a small IT staff. Gateways key benefits are price and service, said NSL officials, in Valley View, Ohio. NSL will save $12,000 to $13,000 over three years by switching to Gateway, in large part due to a depot service that Gateway offers for free and for which other vendors charge up to $750 per server.

"Theres only [two of us], so we have to rely on outside support coming in," said Sharon Martinko, network administrator at NSL. "If I can eliminate outsourced network help coming in because I can deal with [Gateway] directly, that will save money."