Gateway, Inc.

(858) 848-3401

14303 Gateway Place

Poway, CA 92064
www.gateway.com
 

Sales

$3.4 billion

Business Description 

As a branded integrator of personalized technology solutions, Gateway, Inc. (“Gateway” or “we”) provides a broad range of personal computers (“PCs”), consumer electronics products, enterprise systems, communication tools, applications, training and related services. Our strategy is to deliver value to customers by offering a wide range of plasma, LCD and rear projection TVs, digital cameras, other consumer electronics products, and enterprise systems, which integrate with and complement our award-winning line of PCs and employ the latest technology at competitive prices, along with a full complement of related products and services.

We are one of the leading suppliers of PCs to the U.S. market, with an estimated market share of approximately 3.8% in 2003 based on dollar sales, according to preliminary data from International Data Corporation. We are also a significant supplier of PCs to the U.S. professional market, consisting of large corporate, small and medium businesses and government and educational institutions. We sell our products nationally through a number of channels, including our website at www.gateway.com, our telephone call centers (1-800-GATEWAY), our retail stores where customers can experience our products with assistance from our trained sales force and through a limited number of third-party channels. We believe these multiple sales channel options, our diversified product and service offerings, and our superior customer relations and support provide a unique customer experience that differentiates us from our competitors.

Our strategy is to profitably grow our PC business, to diversify our revenue and increase our gross margin with consumer electronics products and related services, and to reduce our cost structure. Our goal is to make Gateway the place where customers can rely upon effective advice to purchase PC and consumer electronics products and services that provide integrated personalized technology solutions. We plan to continue to deliver the latest technology solutions and to develop innovative new products and services. We also intend to continue to maintain a strong liquidity position to maintain our financial flexibility. We exited 2003 with $1.1 billion in cash and marketable securities.

In 2003, we continued our efforts to reduce fixed costs, strengthen our balance sheet and implement our strategy to evolve from a traditional manufacturer of PCs to a leading branded integrator of personalized technology solutions, substantially expanding our range of consumer electronics products. We also implemented a product fulfillment model that we believe provides us with a competitive system to source, build and deliver products to our consumer and professional customers. In the area of products and services, we continued our strategy of leveraging our existing retail presence and our brand position through new products that include plasma, LCD and rear projection TVs, digital cameras and other consumer electronics products. During 2003 we added 118 new products and services in 22 new categories. We intend to expand our consumer electronics and other non-PC (“CE/Non-PC”) business in 2004 and work to further reduce our costs.

On January 30, 2004, we announced our agreement to acquire privately-held eMachines, Inc. (“eMachines”), a leading PC company, for 50 million shares of Gateway common stock and approximately $30 million in cash. Under the agreement, Wayne Inouye, eMachines’ chief executive officer, will become the new chief executive officer of Gateway and a member of Gateway’s Board of Directors. Theodore W. Waitt, Gateway’s founder, will remain Chairman of the Board and Roderick M. Sherwood III will remain Gateway’s executive vice president and chief financial officer. We anticipate that upon the closing of the transaction, we will focus on rapid finalization and execution of combined cost savings plans, channel and product expansion initiatives and other growth strategies.

During 2003, Gateway continued to experience a decline in demand for our PC products and incurred net losses that were partially offset by increased demand for our higher margin consumer electronics products. We expect that the acquisition of eMachines will create a combined company that will be a strong player in the U.S. PC market across multiple channels of distribution and across both the low-end and higher-end PC markets, with sales in key international markets, particularly in the United Kingdom and Japan. We are also evaluating re-entry into other international markets.

PCs and Servers

We offer our customers a broad line of Gateway-branded PCs and servers. We market our PCs with recommended configurations, but our large professional customers can also custom-configure some of our PCs with a choice of microprocessor clock speeds, memory, storage capacities, as well as other options. The following are the key products within this class:

Desktop PCs. Gateway offers a series of desktop PC products, developed to serve targeted customer segments. We offer a range of standard model series—the 310, 510, 710 and Gaming PC Series for consumers and the Gateway E-Series for professional customers, with each series having a number of recommended configurations with increasing levels of technology and features. In addition, Gateway provides an all-in-one desktop, the Profile Series, an all-in-one PC, TV, DVD, PVR, MP3 player, FM tuner and stereo system, the 610 Media Center and the FMC-901 Family Room Media Center PC. Large professional customers can purchase a configuration of our E-Series that they customize for their particular needs. Desktops represented over 48% of net sales in 2003.

Mobile PCs. Gateway offers a series of mobile PC products to provide portable computing capabilities for both consumer and professional customers who operate in both a mobile and networked environment. The systems are available with docking stations and various multimedia applications. As with desktops, portables have a range of standard model series—the 200, M305, M350, M405, 450, M505 and M675 Series, with each series having a number of recommended configurations. Portables are designed to range from the very light 200 series products that can be undocked from the base unit and weigh about 2 pounds to the M675 Series, a high-end, feature-laden desktop replacement. Mobile PCs are a growing percentage of Gateway’s PC business, representing about 22% of net sales in 2003.

Tablet PC. Weighing in at less than three pounds, our Tablet PC, which is a special product included within our mobile PC product line, couples the flexibility and ease of a simple notepad with the full computing power of a notebook PC. With its external mobile keyboard and docking station and stand, the Tablet PC is like a traditional notebook PC. However, when in tablet mode, our customers can write on it using a digitizer pen, providing an innovative, convenient computing experience. In addition, we offer a hybrid mobile-tablet PC, the Gateway M275 Series, which is a feature-packed notebook that easily transforms into a Tablet PC.

Servers, Storage and Networking. Gateway also offers Gateway-branded servers and storage and networking products and related services for professional customers. Every Gateway server has an adaptable design and can be custom built with a variety of options to fit the customer’s needs. Gateway servers can be ordered in tower based or rack-mounted configurations, with Windows® operating software. Servers, storage and networking products and related services represented approximately 2% of net sales in 2003.

Consumer Electronics and Other Non-PC Products and Services

A key element of our growth strategy is to expand CE/non-PC products and services, particularly those under the Gateway brand. CE/non-PC products were previously referred to as “digital technology solutions,” and “beyond-the-box” offerings, and include all products and services other than the PC, such as peripherals, software, accessories, extended warranty services, training, internet services, plasma, LCD, and rear projection TVs, digital cameras, other consumer electronics products, enterprise systems and financing. Since May 2003, we added 118 new products and services in 22 new categories, exceeding our internal targets. CE/non-PC products and services represented approximately 28% of net sales in 2003.

Consumer Electronics Products. During 2002, we began to offer a selected inventory of CE/non-PC products, many of which are branded under the Gateway name, in our Gateway retail stores as well as on our website and our call centers. We expanded our Gateway TV product line to include 12 models of plasma, LCD, and rear projection TVs. Initially launched in the fourth quarter of 2002, Gateway’s TV product line delivers a high picture quality television to consumers at attractive price points. Our plasma TV line is available in 42, 46 or 50-inch wide screen sizes, each providing an attractive ultra-thin design. Similarly, we introduced Gateway’s digital camera product line in the third quarter of 2003, which was quickly expanded to include 6 models in response to product demand. During 2003 we also expanded our line of home entertainment offerings to include a high-end surround sound system. We also offer a variety of home networking solutions. We plan to introduce additional CE/non-PC products in 2004.

Peripherals, Software and Other PC-Related Products. We market printers, scanners, mobile PC accessories, monitors, CD and DVD burners, storage devices, surge protectors and other PC accessories that are manufactured by leading companies in their respective markets. We offer an increasing number of these products under the Gateway brand. We also market a broad range of third-party software offerings, from entertainment and productivity applications for the consumer market to vertical applications for various segments of the commercial and institutional markets. Peripherals, software and other PC-related products are sold in all four of our sales channels, including our website at www.gateway.com, where more than 7,000 products are available.

Services and Support

We provide customers with a number of additional offerings beyond Gateway’s standard warranty, service and support packages included with a typical product purchase.

Consumer Services Support. In our consumer segment, our value added fee-based service and support offerings consist of extended service plans, including extended warranty and accidental damage programs, fulfillment of replacement parts, installation and integration services and technical support services.

Professional Services Support. In our professional segment, our value added service and support offerings are designed to satisfy the needs of customers throughout the technology lifecycle. For this segment, we offer:
• Technology planning services, such as on-site consultation and network design services;
• Implementation services, such as custom installation and imaging, asset tagging and hardware and network installation;
• Productivity services, such as network and application support and custom helpdesk solutions;
• Maintenance services, such as on-site and advanced exchange services; and
• End of life services, such as data migration, deinstallation and asset recovery services.

Customer Relationship Management. Gateway’s Customer Relationship Management (“CRM”) system is designed to achieve high consumer and professional customer satisfaction levels and assists our sales force with respect to repeat and referral business and the delivery of quality service and support. With the increased use of CRM tools and processes, we expect to be able to provide more personalized products and services.

Multi-Channel Delivery. We deliver customer service and support at the customer’s location, at Gateway retail stores, at third-party locations and via telephone and the web. Gateway believes the availability of services through multiple channels benefits customers by providing them with a range of service options. Phone support to consumers is provided by a variety of third-party call center partners. Our professional segment is supported internally.


Communications. We offer a variety of Internet access service options and networking products and services to our consumer and professional customers. Our offerings include broadband Internet access service provided by a number of leading cable broadband providers and wireless communications offerings, as well as narrowband Internet access service and high-definition video services provided by third-party service providers.

Financing Programs. In 2003, we partnered with a number of third-party consumer financing institutions who provided financing of approximately 26% of our consumer net sales on a non-recourse basis to Gateway.

Training. Through our nationwide network of Gateway retail stores, as of February 1, 2004 we had approximately 1,968 classroom seats throughout the U.S., offering training on general PC usage, popular third-party software, Internet usage, digital devices, and networking services to our consumer and professional customers. We also offer a unique, Gateway-branded multi-media training solution that combines instructor-led, CD-ROM and Internet-based training classes that enhance customer convenience and accessibility.
 

Ticker

GTW

SIC Code

3571 - Electronic Computers

Desktop Computers-  Category Main Page 

Notebook Computers -  Category Main Page 

Printers -  Category Main Page 

Desktop Computer Companies in the Directory

Apple

Dell

Gateway

Hewlett Packard

IBM

Notebook Computer Companies in the Directory

Apple

Dell

Gateway

Hewlett Packard

IBM

Printer Manufacturers in the Directory

Dell

Hewlett Packard