Sales Focus Will Either Be Consumers or Businesses
LAKE FOREST , A management shake-up that put Gateway Inc.’s founder back in the driver’s seat is raising questions among industry observers about the future of the company’s 600-employee Lake Forest division in Orange County.
At issue: Will Ted Waitt , the pony-tailed consumer-marketing wiz and founder who replaced yearlong chief executive Jeff Weitzen in January , refocus on selling to consumers instead of businesses, the heart of the Lake Forest operation?
Some insiders at Gateway Business, as the Lake Forest unit is called, have expressed concerns about Waitt’s return. Some financial analysts doubt Gateway, with a new back-to-basics attitude, will pursue the business market with the same gusto as it has in the past.
“At a minimum it will be de-emphasized,” said Peter Labe of Buckingham Research.
Sue Parks, a Gateway senior vice president and head of the company’s business unit, said that for now Gateway has no plans to curtail or cut its Lake Forest operation beyond what it already has. In January, San Diego-based Gateway laid off 140 employees locally as it moved its North American server production to North Sioux City, S.D.
Cutting Costs
Still, like other computer makers, Parks said, Gateway would continue to look at ways to cut costs.
“We’re going to continue operations as they are,” she said. “We’ll try to save money where we can.”
As for Waitt’s return, Parks said, “Ted’s very supportive of our strategy and very supportive of our direction.”
One analyst said he would be surprised if Waitt cuts back on the company’s business operations.
“It appears the new management team is very much focused on leveraging the assets in place, but their expansion plans will moderate,” said Gerard Klauer Mattison & Co.’s David Bailey of Gateway’s business division. “It doesn’t appear they will scale back.”
From Gateway’s inception in 1985 on an Iowa farm, the company has sold computers directly to consumers. Like Dell Computer Corp. , one of Gateway’s staunchest competitors , the company sidesteps stores and middlemen in favor of lower prices.
In 1997, Gateway acquired Irvine-based business computer maker Advanced Logic Research Inc. in a bid to offset falling prices for consumer PCs. Gateway executives formed what’s now the Lake Forest-based business division around ALR in 1998. A year later, Waitt handed over the company reins to Weitzen.
Cracking Market Difficult
But after years of cultivating a down-home image that appealed to consumers, Gateway has found it difficult to market to large businesses, which usually seek follow-on service and support, analysts say.
“They’ve had a devil of a time getting traction in big corporate markets,” said Stephen Baker of Reston, Va.-based PC Data Inc.
Gateway has tried to pick up the slack by selling software and services with each computer , something the company calls “beyond-the-box” sales. Still, Gateway has struggled. In January, the company reported disappointing fourth-quarter results and last month cut its outlook for the first quarter.
Gateway also pulled the plug on its efforts to sell computers to large businesses.
“We knew we had been very off course in terms of where we wanted to focus in the business strategy,” Parks said at a recent analysts’ conference. “We had been focused up-stream more with the enterprise customer.”
Gateway now is looking to direct its homespun marketing message to owners of small- and mid-size businesses , organizations with 100 or so employees. Gateway also relies on its sales staff in Lake Forest and its network of Gateway Country stores to help drum up sales.
But Gateway Business has its work cut out, analysts say. Fierce competition in the small-business market coupled with falling computer prices are only some of the headwinds Gateway faces as it tries to pump up sales. Generic computer makers, which can offer computer gear at a discount to Gateway’s machines, also pose a threat. Another challenge is unearthing the traditionally hard-to-find small-business accounts.
‘Not An Easy Task’
“It’s not an easy task,” said PC Data’s Baker.
Parks said the company’s local presence through its Gateway Country stores helps it compete against generic PC makers.
“Although we are a global company, we have a local presence,” Parks said. “We have a value proposition that is very complete.”
Gateway Business reported flat sales growth as the company shifted to selling to small businesses. Since last quarter, Parks said, her division has seen double-digit unit growth and she adds that the rest of the quarter looks good. She declined to specify the company’s sales growth rate.
“I’m very positive that we are growing faster than the market,” Parks said.
Simons is a reporter for the Orange County Business Journal.
