Re: Dood, you're gettin' a Gateway..

  • From: "Troy V. Barkmeier" <barky@xxxxxxxxxxxxxxxxxx>
  • To: Technocracy <technocracy@xxxxxxxxxxxxx>
  • Date: Tue, 02 Apr 2002 12:33:34 -0600

>Hey I just heard from Jim Kinkade from ISU at lunch today that the 
>ISU labs are going to Gateways because of an offer they couldn't 
>refuse: 1.6GHz P4, 256M/40G, DVD, CDRW, (2 separate drives), 18.1" 
>flat panel = $1200. He said the displays are worth about $800 alone. 
>Wonder how long Gateway stays alive by giving stuff away. 

Standard Disclaimers: I used to work there, my NDA has expired, I may or
may not still have contact with people in the company, don't buy or sell
stock based on this information, etc.

It's more or less common knowledge that Gateway is in serious trouble.
They do have something of a cash reserve (about $1B I've heard) and Ted
is back at the helm, but they have a tough road ahead. They have cut
their their workforce by over 50% in the past year and a half (from a
high of 24,000 to around 11,000 employees presently); they have closed a
number of their retail stores here in the U.S.; they have killed off all
non-U.S. divisions (Japan, Australia, Malaysia, Ireland, Singapore, etc.)
and all retail stores outside the U.S.; they have closed over half of
their U.S. call centers including a brand new one they built in Salt Lake
City for the Olympics, and closed a production facility in Utah as well.
Furthermore, as a result of this very public downsizing, they have taken
a huge hit against whatever small amount of corporate mindshare they had
been able to eke out in the past five years or so. The corporate world
wants stability from a PC vendor, both financial stability and product
line stability (manageable product configuration lifecycles, etc.), and
today's Gateway has neither.

My personal opinion is that Gateway is being punished for losing focus.
Seems funny to think of it now, but I have a couple t-shirts at home from
the mid 1990s that testify that Gateway did have some street cred once
upon a time. One shirt in particular commemorates the 1994 PC World
Reader's Choice awards, in which they swept every category - Best Desktop
System, Best Tower System, Best 486 Notebook, Best Subnotebook and
something else I can't remember. Mail-order computer buyers back then
loved Gateway because they had one very simple winning strategy -- buy
fairly high-performance components from multiple vendors of reasonable
quality, then stuff as many of them as you can into a single box and sell
it to the consumer for 10-15% less than the other guy. The average
consumer, who buys one new PC every three years or so, tends to make
purchase decisions based on broadly defined specs (32MB RAM, 1GB hard
disk, 64-bit video card, 90MHz Pentium, etc.); they probably won't ever
know or care whether their 64-bit video card is an ATI Mach 64 or a
Matrox Millenium. Gateway used this to their advantage, and brokered
parts like commodities, buying whatever was cheapest on a given day
within a specified quality range. By and large, consumers loved this
scheme because the bang-for-buck ratio was off the charts.

Corporations grew to hate Gateway for the same reasons consumers loved
them. Make no mistake, no matter what you've heard, Gateway sold _tons_
of PCs to corporations. Some of these customers might surprise you (e.g.
Sandia National Labs was and may well still be one of Gateway's largest
accounts). However, corporate IT types tended to get a little moody when
they would order 100 machines one week with a certain set of specs, then
another 100 machines a week later with the same specs, and have second
set of machines show up with the correct specs, but different video
cards, NICs, and motherboards. In fact, it was far from uncommon for a
single large order of 200+ machines or so to ship out of the factory _on
the same day_ with differing video cards, etc. -- "Jeb, we're out of
EtherExpress NICs!" "No worries, Lynyrd -- we got a whole pile of
EtherLinks over there that just came in today, and they're 10baseT too --
jest as good."  It all depended on where your order fell in the buying
cycle, and corporations began to balk. When Dell started pushing the
Optiplex line, whose sole redeeming feature was that they were designed
from the ground up to make IT folks' lives easier (built-in security
hardware, easier access to swap components, 9 month managed component
lifecycles, etc.), Gateway's corporate accounts began to defect. 

Gateway responded with the Gateway "E" series, which was their version of
the Optiplex, but I feel they're still struggling with what it means to
build "enterprise quality" computers. We buy all "E" series Gateways here
at Carleton, and I have serious concerns about the QA and R&D behind
these boxes. I know that corporate is where the money is, but I think
that Gateway's fundamental business model was best suited to home users
and small business owners, and they could have continued to beat Dell's
ass in that arena if they hadn't tried to remake themselves into an
"enterprise" computer vendor, and a poor one at that.

>Troy, did 
>you go back to Gateway? Where do you work/live now?

I am the Student Computing Coordinator for Carleton College in
Northfield, Minnesota. Which is to say that I'm doing basically the same
job that Ginny and I did at ISU with a 25% pay increase and half the
number of labs to support. Also we're about 30 miles south of the
Minneapolis/St. Paul metro area, which is a hip-hop-happening place. Tons
of IT companies, excellent live music scene, great restaurants, etc. --
kind of like Austin, TX, only with far fewer rednecks and lots more snow
(almost a foot in the past 48 hours).

>A CD-RW? 
>An 18.1" LCD?
>It's a pretty good deal, but it's technology for technology's sake. As
>soon as the first "WaR3Z d00dZ" start making copies of PhotoShop and
>Mathmatica, the labs are going to have to restrict the CD-RW drives
>anyways. And then there'll be the people watching DVD movies in the labs
>while other people are just waiting to type thier term paper. So they'll
>institute time limit policies or something stupid like that. And the
>there's the LCDs... Well I guess I don't really have anything against
>them. Only that they'll be expensive to replace if damaged...

I'll respond briefly to this too, just cause I'm waiting for my wife to
show up for lunch. All of this equipment is very relevant in labs, or
should be. Here at Carleton last year, we replace a third of the lab
computers every year, about 50/50 PCs and Macs. Last summer we bought the
G4's with SuperDrives and Gateway E-4600's with DVD-ROM and CD-RW. We
also went with LCDs for both platforms. There was a short burst of CD
copying etc. at first, but it was never really a problem. The thing to
remember is that the labs had "War3z d00dZ" when the biggest media we had
was the 100MB Zip -- hell, even when it was the 1.4MB floppy. That's no
reason to deny those folks who are working on academic stuff access to
decent, cheap, reliable rewritable storage, which CD-RW is. We do have
students who watch DVD movies in the labs, but 95% of them are watching
them for film or foreign language class. The lab is not exactly the most
comfortable place in the world to watch a movie. The chairs don't recline
and you can't even bring in your popcorn. As far as the LCDs go, they
were the only thing I was worried about; I thought we'd see more fingers
poked through screens, etc.; so far, we've had zero problems. Also, we
had to dismantle one of the labs over spring break for recarpeting; you
can guess how happy I was to have bought LCDs at that moment.

Wow, can I not shut up?

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