Gateway Aims for Success After Transition - Page 6

Can you talk about Gateways global ambitions?

We will create an opportunity for us to move into international markets in the commercial area when we choose to do that.

Our first step is to do business, to create commerce, and top-of-mind awareness in any foreign market. Weve elected to do that with retail.

Well be able to establish a beachhead in markets that make sense for us internationally and when we choose—when we have the time and the capabilities—we can always move into the direct space.

Dell and HP certainly see the international market, particularly the emerging markets like eastern Europe and Asia, as keys to their future growth. Do you share that point of view?

No, not at all. If you own technology, and youre a monopoly, or close to a monopoly, like Intel [Corp.] and Microsoft [Corp.], your margins are set, so any new markets generates more volume for you, and a lot of profits.

For a PC brand in an emerging market, you definitely have limitations on being able to sell a particular mix.

In fact, in emerging markets, you typically sell in a very low-margin, low-end mix because they just dont have a lot of money.

So what youre saying is that there is sufficient business that can be grabbed in the domestic market?

Yes. We have to be able to win in our back yard before we start venturing beyond that. Theres plenty of opportunity here.

Is that opportunity growing your own base or taking form competitors? And who among your competitors is most vulnerable?

Theres a two-pronged strategy. The first is, we want to grow our base. We use the term "to spider," to kind of grow within an account.

So you get a beachhead in an account, then you reference-sell from that site to another site to another site to different decision makers in that same account.

And its cheaper to grow inside a base, or develop a base, than to acquire a new customer. That being said, our efforts are around development.

However, there are definitely selected, very targeted acquisition opportunities we go after. In a marketplace where youre seeing consolidation, especially in the government area—the consolidation of bulk buys, where individual agencies are now being forced at the state level and the federal level to buy as one—you clearly have to go after that business. So both of those are our strategies.

Then among your competitors, whos vulnerable? Who can you take business from?

This is a very tough industry. I wouldnt say that anyone is vulnerable or that anyones easy to take. We look at them on a situation-by-situation basis.

When you move into an acquisition environment, you have to create a discontinuity in the market, through either price, technology or relationships. Those are the three easiest ways to do it.

So you look at any given customer and say, "Can I create a discontinuity?"

If I cant, theyll move on to find someone else. So if we have a great relationship, or weve been building relationships, those are the situations we go after.

But nobodys easy out there, whether its Dell or HP or IBM/Lenovo, theyre all tough to beat on their home field.

Over the past 15 months, youve done a lot of streamlining of your product lines. Do you expect to continue that, or are you where you want to be?

No, I think right now youre seeing the strongest lineup that Gateways ever offered to our targeted markets.

Youre going to see additional products during this year that focus on the professional market.

Well be introducing the replacement for the M275 and our Tablet PC shortly.

Well be working on a sub-four-pound notebook that well roll out sometime next year.

Youre going to see more products targeted especially at the professional marketplace.

There also will be an upgrade to our Profile all-in-one that well be rolling out at the end of the year, and weve got a brand-new server line thats been very successful.

Looking forward, what do you see as the key challenges for Gateway over the next six to 12 months?

Its convincing more customers that they should give us an opportunity to sell them something. Thats number one.

Number two is delivering high-quality products in a timely fashion. Number three is being able to service their needs if there is an issue with the product.

Thats what were focused on. Three basic things. Real basic stuff. Were not working on anything fancy right now.


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