When he took the reins at Gateway in March 2004, Wayne Inouyes first job was to right a company that had been battered by the tech slump and the rapid commoditization gripping the PC business.
Fifteen months later, Gateway is on a more secure footing, with three consecutive profitable quarters, something the company hadnt seen for more than three years.
With a firmer financial base and a game plan that calls for playing to its strengths, Gateway Inc. and its CEO are looking to grow the business, relying in large part on the commercial marketplace.
Executives with the third-largest computer maker in the United States say they are going to do this by offering focused product lines and an approach that makes customers want to do business with Gateway.
“Its about creating customer intimacy,” Inouye said in a recent interview with eWEEK. “We have to be nicer, more approachable, more responsive to our customers.”
By the time it acquired Inouyes former employer, eMachines Inc., for $289 million, Gateway had undergone a series of transformations in hopes of stemming the financial bleeding.
The last strategy before the eMachines acquisition had been the idea of Gateway as a “branded integrator,” relying heavily on consumer electronics and the companys 200-plus Gateway stores.
In short order after the eMachines deal, Inouye—who replaced founder Ted Waitt as Gateway CEO—shuttered the stores, slashed the payroll, outsourced manufacturing, trimmed the management ranks and moved the companys headquarters from Poway, Calif., to Irvine, Calif. The moves were “all about getting our cost structure in a position to compete,” Inouye said.
Leslie Fiering, an analyst with Gartner Inc., said Inouyes moves should help Gateway compete in a hypercompetitive PC industry that is seeing the latest replacement cycle wind down and consolidation continue. “Its going to be a tough ride, and for anyone who doesnt have low margins, theyre going to be in trouble,” said Fiering in San Jose, Calif.
Fiering and other analysts think Gateway needs to improve in its commercial area, particularly in the messaging and services surrounding it. Gateway is in a crowded market populated with companies such as Dell Inc.; Hewlett-Packard Co.; and Lenovo Group Ltd., a strong player after buying IBMs PC business.
Inouye and other Gateway executives said their message of good products at a good price, combined with high-level customer service, is paying off.
In the first six months of this year, Gateway has reported more than $65 million in professional deals, covering educational institutions, government and SMBs (small and midsized businesses).
Inouyes moves have brought much-needed stability to Gateway, according to customers and partners. Dakota State University this month announced a program in which it will provide 2,400 Gateway M275 convertible tablet computers to students and faculty.
Although the Madison, S.D., university had been a Gateway customer in the past, IT Director David Zolnowsky said it was Inouyes leadership and Gateways customer-centric focus that ensured a continued relationship.
“When we got into the tablet program, that was one of the questions we had,” Zolnowsky said. “Where was this company going to be in the next three years? You always have that question in the back of your mind, but were much more comfortable with it than we were 12, 13, 15 months ago.”
Ross Skinner, CEO of business partner S2 Business Solutions Inc., of Scottsdale, Ariz., said the constantly changing business plans at Gateway before Inouye took over undermined the companys ability to compete for deals.
“It was making it much more difficult to win,” said Skinner, who has been working with Gateway for eight years. “[Gateway is] much more of a consideration now.”
Gateways plans to grow its professional business involve continually enhancing the product line and tightening its customer relationships.
“Were going to be a credible alternative to Dell in terms of products, price, [and] our ability to deliver consistently and offer a high-quality product,” said Bruce Smith, senior vice president for Gateways professional division. “Again, the differentiator is the level of customer intimacy that we offer.”
Inouye is looking to increase that intimacy in numerous ways. Next month, he said, Gateway will kick off an initiative aimed at SMBs that will offer services through the companys direct channel.
For example, many SMBs need a third-party VAR or systems integrator to help them build their IT infrastructure but have little experience finding those partners. Through this initiative, Gateway will help customers find third parties.
Gateway is also working to become a trusted adviser to businesses by making its Web site a place not only for buying products but also for getting answers to the businesses computing questions.
“If I look at the most trafficked Web sites in the world, they are really sites for content and information, not sites for commerce,” Inouye said.
“By offering both—a site to conduct commerce but, first and foremost, a place to come and get information—well be able to reinforce our brand for being honest, friendly, smart, sociable.”
The company will also stick with its aggressive road map for product rollouts, Inouye said. Gateway in September will announce an enhancement of its M275 tablet computer and later this year will introduce upgrades to its E-Series desktops and Profile all-in-one system. Next year, Gateway will roll out a sub-4-pound notebook, Inouye said.
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