Gateway is having major problems.–Ed
Gateway is pulling out of non-U.S. businesses.
This is a company that’s having problems.
Outside of its US business sales, revenues last quarter from US consumer sales and overseas sales dropped 40-50% from that of a year ago. Lower prices played some role
in this, but most of the drop was due to a lot fewer boxes being sold (36% less in the US consumer market, for instance).
That’s terrible, and worse than most other places are doing.
Some of that drop may be due to tighter credit checks. Looks like Gateway overzealously sold boxes to financially dubious customers who couldn’t or didn’t pay them, and their bad debts soared.
Overseas markets have never been a big proportion of Gateway sales, only about 15-20% even during good times. Sales were more like 12% last quarter. However, it wasn’t like overseas sales were bleeding money
or doing much worse than U.S. sales, looks more like a scapegoat to throw to the shareholders to convince them something dramatic is being done than anything else.
There’s probably more fat to be cut from Gateway’s US activities, particularly the Gateway Country stores, but that doesn’t seem to be the core problem. The real problem is not selling boxes.
Enter the real wolf. No farmer in the Dell here, more like a vampire.
Gateway’s core problem is that they don’t really excel at anything, and Dell does (or at least people think they do).
They don’t have outstanding pricing; they don’t have outstanding customer support; they don’t have outstanding products. Nor do they have outstanding media coverage.
On the other hand, Dell has at least the reputation of being outstanding in the first two if not all these areas. By focusing on Internet sales (as opposed to Gateway trying to be all things to all people), they also have an extremely lean operation; general administrative costs only amount to about 10%, which is much lower than Gateway’s “normal” 15% (or for that matter, its other competitors).
That may not seem like a lot of advantages, but overall, Dell told the SEC it sold 27% more boxes last quarter than they did the year before, slump doesn’t seem to be bothering them; Gateway told the SEC they sold 21% less. Dell is sucking away a lot of Gateway’s (and everybody else’s) sales. That is Gateway’s problem, not whether or not they have overseas sales.
If they have a relatively unappealing product, they aren’t going to sell it anywhere. Get the appealing package first, then worry about where you’ll sell it.
If they don’t, this cow isn’t going to be led to pasture but slaughter.
Tomorrow, two once-proud quality computer and component leaders gone to schlock become one once-proud computer and component leader gone to schlock.