Chuzz-
I am somewhat stunned by Gateway's strategy to aggressively grow their proprietary "country stores" from 50-400. If I heard Ted Waitt correctly, his answer to this question was, " Well, x amount (I don't remember exactly the amount, 70% ?) of computers are sold through retail, and we want to be able to capture some of that business). By building a proprietary, retail network? This makes absolutely no sense to me....This strategy goes in the complete opposite direction of what the rest of industy has recognized as truth. (and what Dell AND GATEWAY has shown the rest of the industry!). Does Waitt not remember what happened to Dell in the early 90's? (I think Ted Waitt and management team would be wise to read the HBR article from May/June about profit maximization). These country stores will surely become an albatross around their neck (and a drag on earnings for GTW for the next year or so) until which time they will close these stores and take a write-off..
The only think I can think of is that Apple's recent deal (and success, albeit with limited data) with Computer City (?) has thrown them in this direction...
Can you see anyway GTW can succeed with this retail strategy? Even if they could (somehow), I would think it would only be at the expense of HP, IBM, CPQ, but not Dell.
Of course, I view this as great news (at least short-term) for Dell....I had viewed Gateway as (one of the companies) who could best provide a challenge to Dell in the large corporate space (if they would take the right steps; although it would take years)....it appears that they have abandoned the large corporate space (for the most part) and wish to slug it out with CPQ, HP, and IBM on the low end by "out retailing" them.....I assume that they will be back at the large corporate market after this fails, but, by then, Dell will be even greater entrenched there.....Moreover, I've got to question the management savvy of the people at GTW.....Can they guys ever really compete with Dell (if they are the management team coming up with these ideas?)
On another note, you made a great point (the other day) about the
tendancy (with almost religious fervor) for many investment advisors to assume that at some point good news must follow bad news...and that the statistically probability of a company (that consistently produces good news like Dell) to incur a bad event increases over time (after all, these things do need to even out!)....What a crock! This holds investors hostage to companies and management teams that have time and time again shown their ineptness......I am really amazed at the amount of praise that management team of some companies, like HP, STILL receive from the investment pros...Give me proven, consistent (boring like MD) winners anyday...
Are you going to the annual meeting? |
