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A Gateway to disaster?







A Gateway to disaster?

A Gateway to disaster? 09/26/2004 12:51 PM

There was a time, once, when I didn’t need a computer. Somehow, a pen, some paper and a word processor were enough to get my words across — and if you had asked me what a gigabyte was, I would have simply walked away, confused. My, how times have changed. When I was entering college, computers were just beginning to hit the mainstream, and I can remember using my friend’s Performa to get those last-minute term papers written. To be honest, I wasn’t particularly impressed … which is not to say I was unimpressed either; I was merely a clueless word-processing neophyte who saw a computer as a logical transition from an electronic typewriter. To be honest, the first time I really noticed a computer was when a friend of mine brought home his brand new Gateway desktop. Between the cow-spotted box and the bright screen (at least as compared to my friend’s Performa), it was my experience with Gateway that convinced me to buy my first computer. Then, three years later, I bought a Mac, and I never looked back. Gateway, however, has, and it's not a <A HREF="http://www.pcmag.com/slideshow/0,2394,l=135602&s=400&a=1356 03,00.asp">pretty sight</A>. So, what happened. In 1997, Gateway was at the top of the charts, but by 1998, they had crashed — in more ways than one: Its stock plummeted, its designs faltered, its creativity suffered, and its outlook turned oh so bleak. Now, if the stock drops a dime, that's 2 percent of the company's worth. It's unfortunate how these things happen to tech stocks. More than any other sector, the tech market’s volatility have kept investors at bay for years, wary of even the slightest fluctuation in earnings or sales. On a good day, it's enough to drive a CEO to drink; add a high-priced Google and a bloated Apple to the mix, and there might be a few job openings in upper management. Seriously, though, these types of booms and busts are most certainly cyclical, and every few years a stock comes along that performs better than the rest, with numbers breaking recent company highs and products that have got everyone talking. Kinda like Apple. Kinda like now. In February 2001, after cutting some 3,000 jobs, icing plans for 60 retail stores and drastically cutting its number of possible PC configuration, Gateway announced that it was "shifting back to primarily selling computers, after pursuing a strategy aimed at selling services and peripherals, so-called 'beyond-the-box' revenue. Executives said Gateway will focus on selling computers first, instead of pushing a combination of products from the outset." Which is to say that Gateway shifted away from a profitable sub-business to refocus its efforts back on its bread and butter. So too, with Apple and iPod. I've written several columns examining Apple and iPod: Some have explored Apple's shift from manufacturing computers; some have suggested making iPod its own brand, but throughout it all, the iPod has carried Apple through supply slumps and sales speed bumps. The truth is, without iPod, Apple’s stock wouldn’t be anywhere near $40. Tech stocks have proven that investors cannot live on computers alone. Of course, if anyone can do it, Apple can. While Gateway still hasn’t found the formula that made it so popular in the mid 90s, Apple continues to push ahead, straddling two markets with dexterity, and (thus far, anyway) succeeding at both. But it remains to be seen whether the iMac will sell. And after nearly 16 months, the Power Mac doesn't have much more juice than it did upon its introduction. Whatever happens with the fourth quarter (which ends Thursday), it seems as though Apple doesn’t have too much to worry about at the moment. But eventually, a decision will need to be made — Gateway chose poorly and has never recovered. Somehow, I think Apple will get this one right.




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