Gateway Will Match Its Rivals' PC Prices



Gateway Will Match Its Rivals' PC Prices

Wall Street Journal; New York, N.Y.; May 31, 2001; By Gary McWilliams;

Sic:334111Sic:454110

Edition:

Eastern edition

Start Page:

B.13

ISSN:

00999660

Subject Terms:

Competition

Pricing policies

Personal computers

Price wars

Companies:

Gateway IncTicker:GTWSic:334111Sic:454110

Abstract:

Ted Waitt, Gateway's chief executive officer, said the offer and a new advertising campaign touting its pricing aims to get more PC buyers to

consider Gateway products. The offer would likely continue through June and may be extended to customers outside the U.S., he said.

The offer comes as electronics retailer RadioShack Corp. earlier this week warned its profit would plummet because of slow home-PC and

wireless-phone sales. Mr. Waitt said that while it was too early to call a bottom in the home-PC market, he expected Gateway's pricing would win

sales away from retailers.

Gateway's move signals the industry's price war isn't about to end soon and could soon force consumer PC makers such as Hewlett-Packard to

offer similar low-price guarantees, said Standard & Poor's computer analyst Megan Graham-Hackett. A H-P spokeswoman said it would pass along

component price drops but isn't joining the price war.

Full Text:

Copyright Dow Jones & Company Inc May 31, 2001

Gateway Inc., firing a new volley in the personal-computer industry's price war, said it would match the advertised prices of major rivals.

The San Diego-based PC maker, which has been the hardest-hit company in a price war launched by direct-sales rival Dell Computer Corp., is building a new advertising

and marketing campaign around its lowest-price offer.

The company will roll out the campaign with television and print ads dubbing the current price war "cool."

Beginning today, Gateway will sell PCs comparably outfitted to those from Dell, Compaq Computer Corp., Hewlett-Packard Co., International Business Machines Corp.,

Sony Corp. and Toshiba Corp. for as much as $1 less than the advertised price of its rivals, said a spokesman.

The offer covers one home PC or as many as 10 PCs or server-computers for businesses. The company couldn't say how long the offer would last.

Ted Waitt, Gateway's chief executive officer, said the offer and a new advertising campaign touting its pricing aims to get more PC buyers to consider Gateway products.

The offer would likely continue through June and may be extended to customers outside the U.S., he said.

"We feel we'll be able to take share" away from rivals, he said in a telephone interview. "If [buyers] never talk to us, we never get a chance to get the business," said Mr.

Waitt.

Initial tests of the lowest-price offer in Dallas and Phoenix showed the impact of lower prices on profits were offset by higher unit sales, he said. Not every customer is

motivated by price comparisons, he pointed out.

The offer comes as electronics retailer RadioShack Corp. earlier this week warned its profit would plummet because of slow home-PC and wireless-phone sales. Mr. Waitt

said that while it was too early to call a bottom in the home-PC market, he expected Gateway's pricing would win sales away from retailers.

"If you put a good offer in front of the market, it does move the needle," he said. "How high will the needle move? We'll see," he said.

Gateway's move signals the industry's price war isn't about to end soon and could soon force consumer PC makers such as Hewlett-Packard to offer similar low-price

guarantees, said Standard & Poor's computer analyst Megan Graham-Hackett. A H-P spokeswoman said it would pass along component price drops but isn't joining the

price war.

Gateway's price guarantee formalizes a practice the company has been employing in telephone and store sales for more than a month, said analysts. The company now

employs software to track rivals' price offers and will use the program to verify rivals' print and online prices, a spokesman said.

Some analysts said the company would be hard-pressed to turn any incremental sales from the offer into profits, because its costs are still higher than rivals are.

However, Needham & Co. analyst Charles R. Wolf said that if the campaign succeeds in bringing new customers into its Gateway Country stores, the company could win

new profits from PC add-ons such as training and service.

Late last year, Gateway was caught unprepared for a sudden sales slowdown that has dragged into this year. For the first quarter, it posted a loss of $503 million after

charges as sales fell 15% from a year earlier. Dell has employed free-shipping offers and launched price-comparison ads to lure Gateway shoppers to its PCs.

Gateway said it doesn't expect the offer to affect second-quarter results. It continues to expect earnings before charges to be "approximately break-even," the company

said.

As of 4 p.m. in New York Stock Exchange composite trading, Gateway shares fell 73 cents to $16.74, just off the 52-week low of $14.18 and nowhere near the 52-week

high of $73.06.

Shares of other computer makers also fell on a generally down day in the stock markets. As of 4 p.m. in Nasdaq Stock Market trading, Dell fell $1.24 to $24.41. On the Big

Board, Compaq fell 76 cents to $15.70, IBM gave up $2.62 to $112.65 and H-P slid $1.38 to $28.83.

---

Hello, Price War

Gateway offers to match the price of PCs from rivals.

Who: Gateway Inc.

What: The Gateway Guarantee promises customers that for a limited

time, Gateway will match the price of a comparable PC.

How: Customers need to present a current ad from Compaq,

Hewlett-Packard, Dell, IBM, Sony or Toshiba for a new PC or server

with specifications at least equal to Gateway's specifications.

Where: Consumers can come into one of 300 Gateway Country stores,

call 1-800-GATEWAY or log onto

How Many: Individuals are entitled to one PC and businesses are

entitled to up to 10 PCs and/or servers.

How Long: Up to Gateway

Source: the company

Credit: Staff Reporter of The Wall Street Journal

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download