Gateway Expands Retail Presence

The PC maker signs a deal with Office Depot and also rolls out new desktops designed specifically for retail sales.

Gateway Inc. continued its aggressive retail strategy Thursday, signing on Office Depot Inc. to sell its products and rolling out two new desktop PCs designed specifically for retail sales.

The moves come days after Gateway, of Poway, Calif., announced that CompUSA would sell Gateway-branded products in its 226 stores nationwide.

Gateway President and CEO Wayne Inouye has targeted the retail space as a key part of his plan to reinvigorate the PC maker and return it to profitability in 2005.

The Office Depot deal broadens a relationship Gateway already had with the Delray Beach, Fla., retailer, according to a Gateway spokesperson. Office Depot already had sold some Gateway computers in specific configurations over the past six months, but the new deal will mean Gateway products will be in all 867 stores nationwide on a more permanent basis.

The new desktops, the 500GR and 550GR, are designed to bring high-end features to PCs sold in retail outlets and expand access to Gateway products beyond its direct sales channel, company officials said.

Among the premium features are DVD burners and large hard drives. The PCs also are Gateways first to feature Intel Corp.s 915G chip set, which supports an 800MHz front-side bus, PCI Express x16 graphics and Intels HyperThreading technology.

Gateway has undergone numerous changes since buying eMachines Inc. for $290 million in March. Inouye, the former eMachines CEO who took over the top spot from Gateway founder Ted Waitt, has streamlined the companys management hierarchy, closed a facility in Sioux Falls, S.D., and initiated a plan to cut Gateways payroll to fewer than 2,000 employees by the end of the year. The company had 3,400 at the start of the second fiscal quarter this year.

In addition, Inouye closed Gateways 188 retail stores nationwide, choosing instead to negotiate deals with the countrys largest electronic retailers, something eMachines had done successfully under his tenure. Last month, Best Buy Co. Inc. agreed to stock Gateway desktops and laptops in its 622 stores.

"In terms of what was going on before, this is vastly preferable," said Roger Kay, an analyst with IDC, in Framingham, Mass. "One of the things that the company does by getting out of its own stores is getting rid of those fixed costs, which was a big issue, and gets into profit sharing with retailers, so thats good."

The eMachines acquisition made Gateway the countrys third largest PC maker, behind Dell Inc. and Hewlett-Packard Co., according to Gateway officials. In the second quarter, Gateway sold 795,000 PCs, an increase of 62 percent over the same period last year. Officials said the addition of eMachines products helped it increase sales, but that that was offset by the closure of the Gateway stores.

Gateway is offering eMachines systems in the volume space, priced at $700 or less, with Gateway-branded computers selling at more than $700.


Check out eWEEK.coms Desktop & Notebook Center at for the latest news in desktop and notebook computing.