Gateway: Cost-Cutting, Refocusing Will Lead to Profitability
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NEW YORKâAlmost six months into his new stint as president and CEO of Gateway Inc., Wayne Inouye came here on Monday to outline for financial analysts his plans for bringing the PC maker back to health.
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Gateway Computer is returning to the Japanese computer market, which it abandoned in 2001. But analysts wonder whether the computer manufacturer can make much money there; the market is mature, and it is dominated by local brands.
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Since March, when it acquired eMachines, a maker of low-price PCs, and named Wayne Inouye as its new CEO, Gateway has enacted sweeping changes designed to quickly return it to profitability after a long string of losses.
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Personal computer maker Gateway  Inc. GTW.N on Thursday posted a net loss that narrowed from a  year earlier and bettered its own forecast, helped by higher PC  sales and lower costs.
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IRVINE, Calif., Dec. 8  /PRNewswire-FirstCall/ -- Gateway, Inc. today announced that it has earned the top spot in Technology Business Research's Corporate IT Buying Behavior and Customer Satisfaction Study for Corporate Desktops for the third quarter of 2006.
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Facing continued top-line weakness, the company may have to cut costs.
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Company rolls out new version of its Web-filtering and bandwidth-management gateway for small to midsize businesses.
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Offering customers a try-it-before-you-buy-it option is a smart move.
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After years of hearing that investing in IT was a smart strategic plan, business executives seem to have gotten the message, according to a new Gartner CIO survey released today -- but only when the dollars are going to technology efforts that have visible benefits for the bottom line, primarily externally facing initiatives involving customers or partners.The good news is that, despite the softening economy, IT budgets are going up 3.3 percent across the nearly 1,500 companies that Gartner surveyed. The data that matters for IT execs: Budgets for companies focused on bottom-line-oriented efforts are increasing 4.9 percent, said Mark McDonald, a Gartner Group vice president. Those organizations whose IT strategy involves only an efficiency focus will typically see budget increases of just 1.7 percent.The survey shows that a sea change has occurred in IT priorities, McDonald noted. The top three priorities in 2008 are improving business processes, attracting and retaining new customers, and creating new products and services. The sea change is the third priority, which was the No. 10 priority in 2007. Gone from the top three is reducing enterprise costs, which has slipped to No. 5. The decline of cost-cutting as a priority and the rise of innovation show the sea change that has occurred, McDonald says.But IT managers hoping for a return to the 1990s glory days of annual budget increases of 15-plus percent will be disappointed, McDonald said. In that era, IT budgets were driven by technology initiatives done almost for their own sake, as businesses both experimented with the new Internet and began to use technology widely within their walls. "Today, it's more about specific business needs," he said, "We're seeing strategies well grounded in business operations changes, not chasing a fad."And it's not CIOs driving the budget growth; it's the C-suite executives who now finally see IT as a business enabler, McDonald added. If anything, CIOs who promote IT as a force for business change were typically dismissed as self-interested. He noted, "Calling attention to yourself is never very positive."Although there is a mounting possibility that the U.S. economy may be entering a recession, McDonald doesn't believe IT will see its budgets slashed, as happened in the 2000-2001 recession. That recession came after years of unbridled IT spending whose specific business benefits were often unclear. The more moderate budget growth predicted for 2008 won't give businesses the same easy cuts they had then, he noted. "If you cut IT's budget by 10 percent, you might just see a 0.2 percent effect on the whole budget," McDonald explained, "You can get more bang for your buck by lowering [overall] operations costs through investing in better IT." That's why businesses are looking to increase IT spending for bottom-line-oriented initiatives, he said.
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CEO tells securities analysts that company is doing well, but still needs to reduce costs.
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Not to be cowed by string of losses, PC maker enacts sweeping changes designed to quickly return it to profitability.
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If large businesses use tools such as Microsoft's Solution Accelerator Business Desktop Deployment package (assuming it's easier to use than it is to say), the administrative "best practices" those tools will help them adopt could save them somewhat more per PC than what they spent for the license, according to a Gartner study advanced by a Microsoft product manager who spoke with BetaNews.
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The Story: Look in the mirror, Mr. or Ms. IT buyer. You?ve got more muscle than ever ? and you did it without steroids.[ Slideshow: 2007's top underreported tech stories ]                                                    Despite the wave of consolidation sweeping the industry, buyers have actually gained more leverage than ever when it comes to making deals with their vendors, notes a PricewaterhouseCoopers analysis. ?Software buyers need to realize that the pendulum is beginning to swing in their favor and that there are an increasing number of alternatives in today?s software market,? concurs Gartner analyst William Snyder (no relation to this writer).There are a lot of reasons for the swing, but one certainly stands out: The shift to SaaS (software as a service). The poster child for this phenomenon is Salesforce.com. "Both its development and delivery models are having a disruptive effect on the entire CRM market,? notes Forrester Research analyst Bill Band. But it?s not just Salesforce: By 2011, Snyder says, fully 25 percent of all new business software will be delivered as a service as Salesforce and other vendors push upstream from the small-business market. Already, SaaS providers make up the majority of sales for several segments of human resources applications, and is well-established for supply-chain management.[ InfoClipzflash video primer: Software as a Service ]SaaS is just the first wave of services that are pushing pricing power over to buyers: The more recent move to Web services and the beginnings of SOA (service-oriented architecture) deployment are encouraging the use of modular software, which in turn cuts development costs, makes it harder for vendors to sell expensive suites, and lessens the need for expensive consulting services.And yet another factor is upping buyer?s power, notes Gartner?s Snyder: the emergence of third-party support options that are reducing software?s TCO (total cost of ownership). ?Maintenance services have been a quasi-monopoly for software vendors,? he said. ?For many years, only the software vendor had rights to the source code of the critical components of the system. This made it impossible to go to an open, competitive market to obtain upgrades, services and support, which in turn made it impossible to negotiate maintenance fees.?Interestingly another software trend ? the growth of virtualization ? is beginning to affect pricing for hardware, particularly servers. A report by Infiniti Research suggests that server shipments will start declining in 2008: ?The server market of tomorrow will be a value game and not a volume game.? And that means better pricing for hardware, too.Don?t let your head swell too much, but Gartner vice president Mark McDonald credits ?savvy CIOs? for containing costs that were once out of control. ?They?re saying, ?I want you to implement in a way that gives me the advantage over my competition? ? and they?re not accepting the traditional vendor model, which favors homogeneity and the economics of scale.?The Bottom Line: Chances are that you?re looking at SaaS, Web services, SOA, virtualization, open source, and other technology-delivery methods for a variety of specific reasons, without realizing the cumulative effect is to give you more pricing power. Now that you?ve got the power, use it.Complete list of 2007 underreported tech stories: 1.? Java is becoming the new Cobol 2.? Sun Microsystems is back in the game 3.? Hackers take aim at Mac OS X 4.? There are some threats you can worry less about 5.? Companies may have found a way around H-1B visa limits 6.? Open source?s new commercial strategy 7.? End-to-end Ethernet finally arrives 8.? Blade servers arrive for the masses 9.? BI is dead; long live BI 10. Balance of power shifts to software buyers
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Gateway Inc. GTW.N on Monday said it  would return to its roots as a personal computer company,  backing off on an aggressive strategy of expanding into TVs,  digital cameras and other gadgets in a move to return to  profitability.
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The new Gateway will launch a complete line of notebook PCs as one of many steps to revitalize its business after&#160;merging with Acer, an Acer executive said Friday.&quot;Gateway&#39;s problem in the U.S. is that it mainly sells desktops, but the notebook is the fastest growing segment,&quot; said Gianfranco Lanci, president of Acer, during the company&#39;s third quarter investors conference in Taipei.New Gateway laptop PCs could be out as early as the first quarter of next year. Lanci said that no changes to Gateway&#39;s product lineup will be visible until then because it takes at least one quarter to discuss new products with retailers and distributors.Acquiring Gateway will raise Acer&#39;s share of the U.S. market to 11.7 percent, the company believes, and will give it a strong brand presence.Already, the company expects synergies from the acquisition to pan out better than previous forecasts. Acer predicts cost savings will reach $200 million, higher than a previous estimate of $150 million, and even the revised figure could be raised again, executives said.A large portion of that savings will come from volume discounts from component suppliers. &quot;When we have asked component suppliers for volume discounts, so far we have not encountered a single rejection,&quot; said Lanci.The cost of restructuring the Gateway business and integrating it into Acer is likely to be $30 million, Lanci said. The integration will likely be completed by March 2008, he said.The strategy of the new company will be to sell products under the Acer, Gateway, and eMachines brands. Once a&#160;deal to buy Europe&#39;s Packard Bell&#160;is completed, it will add that name to the list as well. The PC industry has changed, said Lanci. It has become a commodity business and in a commodity business it&#39;s better to&#160;sell products using multiple brands, not a single brand as in the PC industry of 10 years ago.&quot;We&#39;re going to run two brands in most regions plus maybe another that we use for special things,&quot; he said.Acer announced a plan to buy Gateway for $710 million in cash in August, and&#160;completed the deal&#160;last week. The company has nearly completed a deal to buy Packard Bell of Europe, as well.&#160;
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The goal is to save money by going to a shared-services architecture and by standardizing network and other components.
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Embracing a new gadget indubitably means parting with some hard earned dinero. But eMachines, purchased by Gateway Inc. , is offering next-generation technology at this-generation prices.