Gateway plans to refocus attention onPCs as it moves
away from the consumer electronics market it believed would return
it to profitability a year ago.
Gateway recorded a net loss of $339m (£184m) in the second
quarter to 30 June, although $289m of that loss was due to
restructuring and transformation charges from job cuts this year at
the PC supplier. Revenue was $838m, up 5% on the second quarter in
2003, but lower than the revenue guidance Gateway provided in
June.
The consumer electronics strategy, unveiled in May last year,
centred on digital televisions, cameras, audio equipment and home
networking products. Gateway hoped that increased sales of these
higher-margin products would help increase revenue and profits
without having to rely on the volatile and low-margin PC market. It
introduced 100 new products last year in more than 20 different
categories.
Gateway had some initial success with its 42in plasma
television, which it introduced at a "disruptive" price, said Toni
DuBoise, an analyst with Current Analysis. But the company was
unable to translate that success into other areas.
"We were not making a lot of money on the consumer electronics
side at all," said Wayne Inouye, president and chief executive
officer. "It's a very difficult business model to make any money as
a brand."
Gateway is not completely abandoning the consumer electronics
market, but it will stop making and selling certain products over
the rest of the year. It will continue to develop some of its other
consumer electronics products, most likely its digital
televisions.
Inouye took over the chief executive position at Gateway from
company founder and chairman Ted Waitt when Gateway bought
eMachines earlier this year. Inouye revived eMachines with a
strategy centred on low-cost desktops and notebooks sold
exclusively at retail, DuBoise said.
The integration of the eMachines products into Gateway's
business paid immediate dividends, with a sharp increase in the
number of PCs shipped by the company compared to last year. Gateway
shipped 795,000 units in the second quarter, compared to 490,000
units in the second quarter of 2003.
eMachines desktops will be targeted at the low-end of the PC
market, while Gateway-branded systems will embrace the high end.
The dividing line between those two markets is around $700, Inouye
said.
Tom Krazitwrites for IDG News Service