The Continued fall of Gateway Computer

investmenttool.com technology journal

Gateway Computer announced more job cuts last week and the first thing I saw was how Gateway cast a shadow on an the entire PC industry. This is yet another example of the herd mentality punishing an industry for the sins of one of its admittedly more prominent members. Thank you for playing come again, the pundits got it wrong.

Gateway computers has been in trouble for a very long time. Even during the last years of the technology boom, Gateway’s imitation of the Dell model was poor. Earnings estimates were sometimes missed even in the best of times.

Gateway has now failed twice to move into retail computing sales. Their latest effort floundered with disappointing fourth quarter sales.

The primary reason why Gateway has a gloomy outlook is their competitors are eating them alive. Dell Computer declared a price war in an effort to gain market share over a year ago and kept up the pressure. Dell still manages to eek out a profit on most machines and has the efficiencies of being larger. HP has captured the retail market while Dell has captured the post September 11, lets stay away from the mall crowd.

This has essentially left Gateway with no place to hide. JD Power associates rates their computers substantially lower than IBM and Dell as far as quality. People are willing to pay $100-$200 more for a higher quality machine from Dell. But they don’t have to pay more.

Gateway got hit on the market because Gateway failed. It should not reflect on the industry at all.

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Shmuel Protter
investmenttool.com

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