Hoping to bolster declining revenues and slipping market share, Gateway announced that it will market digital projectors to the SMB (small and medium business) and education markets. Digital projectors represent a new and heretofore untested product line for Gateway.
Gateway is the fourth-largest computer maker and has struggled to remain on even ground with its competitors. The company has announced three significant restructuring plans since 2000, the latest announcement coming on March 17th, when it revealed that plans to eliminate 1,900 jobs, or about 17 percent of its workforce.
At the same time, the company revealed its intention to close 80 Gateway stores -- company-branded retail outlets that sell only Gateway products. Shuttering the stores will save the company an estimated US$400 million.
The latest round of
layoffs 
brings to about 10,000 the number of jobs cut
from the company in the past two years in attempts to improve cash flow. The
store closings reduce to about 190 the number of remaining Gateway outlets,
down from a high of 350. Gateway sells computers online, but its
branded-store initiative competes with
Dell's (Nasdaq: DELL) industry-leading online retail
operation.
Diversification Emphasis
Gateway's restructuring efforts have emphasized diversifying in at least two broad ways: from the consumer marketplace into the business marketplace, and from PCs to a broader range of devices. The move into digital projectors encompasses both initiatives.
Gateway began selling flat-screen televisions and digital cameras last year in the consumer arena.
"Gateway has been trying to diversify their product portfolio for some time, because they're getting killed by Dell's direct channel model," Ryan Jones, senior analyst with the Yankee Group, told the E-Commerce Times.
He also noted that when it comes to Gateway's business needs, the diversification into projectors is neither consumer-centric nor business-centric. "In terms of their target audience, they're not particular whether it's business or consumer, they're just looking for a different product," Jones said.
Short-term vs. Long-term
While Jones believes the company's explorations in new markets "could save Gateway," other observers see such dabbling as a short-term solution at best.
"This, along with their movement into plasma TV, has a chance to juice revenues in the near term," Joe Beaulieu, senior stock analyst for Morningstar, told the E-Commerce Times. "I'm not sure it represents a viable long-term strategy. They seem to be grasping at straws."
Reducing the retail load might vitalize the company's balance sheet and bring it to a stronger position against Dell, even as it reduces Gateway’s visibility in the retail space. "Getting rid of that base of retail stores would put the two companies on an even footing," Morningstar's Beaulieu said.
"Some retail presence makes sense, as a way of reaching customers that won't buy online. I would be very surprised if Gateway closed all of its stores. TVs and projectors must be used to generate short-term revenue while they retool their PC business," he added.
Two Models
Gateway's nascent projector line will include two initial models. The 205 SVGA emphasizes portability, and the 210 XGA provides additional connectivity options (wired and wireless) for in-house use. Prices will range from $1,399 to $2,548 for a fully enhanced Model 210. Both units weigh 3.5 pounds and they have similar dimensions.
Gateway has contracted an unnamed electronics manufacturer to build the
projectors.
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