From HQ Conference- Be Gentle says Gateway to analysts.
William:
An apologetic Gateway?
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Source:Red Herring
H&Q report: Gateway spins an apology
By Peter D. Henig
Red Herring Online
April 29, 1999
Perhaps it was a signal that John Todd, senior vice president and CFO of Gateway (NYSE: GTW), chose to start his presentation at the Hambrecht & Quist technology conference off to the side of the podium, out of the spotlight. Only reluctantly did he step up to the mike. You don't want to draw too much attention to yourself when you're about to deliver a 20-minute apology to a roomful of bankers.
Despite putting up some promising unit growth numbers and admirable component cost stats, Gateway, like most of the box makers, is still figuring out how to compete in the sub-$1,000 PC market. It doesn't appear to be making much headway.
"We're prepared to move aggressively into the sub-$1000 market, and we need to get into the sub-$800 market," said Mr. Todd. "But you shouldn't expect to see a major move into this area any time soon." That's not a great way to address a market that by Mr. Todd's own admission now represents 60 percent of retail sales -- but only 10 percent of Gateway's customers.
Gateway partnered with Yahoo for its Gateway.net service.
Dell signed a similar deal with Excite months before.
Compaq's troubles could be good news or bad for Gateway.
BE GENTLE
"Our vision is to own the point of client contact," said Mr. Todd. "We want to become a solutions provider ... all of the solutions around the PC."
This amorphous vision clearly wasn't setting the house on fire, and neither was Gateway's strategy of how it would execute on its business plan. "We're going to increase revenues, diversify our revenue stream, leverage our installed base, drive our Web business, and leverage our [Gateway] Country stores," said Mr. Todd. So much for innovative business strategies.
Although the CFO highlighted Gateway's initiatives of bundling an ISP account into its products and targeting small to medium-size businesses to increase future revenues, there was little indication that things are really hopping down there in Gateway country.
Despite saying that the company is comfortable with analysts' second-quarter earnings estimates of 55 cents a share and a 1999 fiscal year estimate of $2.83, Mr. Todd concluded his presentation with this caveat: "The only thing I'd ask the analyst community to do is to stop raising the consensus estimates any further."
Polite applause followed.
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