BUSINESSWEEK ONLINE : JUNE 5, 2000 ISSUE
BUSINESS WEEK E.BIZ -- COVER STORY The PC Maker for the Internet Generation Computers: The No. 6 PC maker sells computers directly to consumers and small businesses. But, in a Net-centric world, Gateway views the PC as a way to sell Web and other higher-margin services, which now represent 25% of its operating income. The company hopes to reap 40% of its operating income from non-PC products by the end of the year. Web Appliances: Within a year, it plans to roll out Net appliances that connect to AOL. On Apr. 5, the first three products were unveiled: a kitchen countertop appliance, a wireless Web pad, and a desktop device for Web access and e-mail. Gateway and AOL also are collaborating on AOL TV--a set-top box and service that will deliver interactive entertainment and shopping. Financing: It's Gateway's biggest source of income beyond PC sales. The ''Your:)Ware'' package, introduced in 1998, lets a consumer pay monthly installments for a PC bundled with software, Internet access, in-home repair, and the industry's first trade-in option. Software and Peripherals: Gateway sells directly to customers, making it easier to sell them extra software or peripherals. About 40% of Gateway's consumer customers buy software bundles at an average price of $100. That's expected to deliver $117 million in software revenues this year, up 37%, according to Salomon Smith Barney. Peripherals sales are expected to hit $147 million this year, up 37%. Training: Gateway is the only PC maker with a major training program. By yearend it expects to have 5,000 classroom seats in its stores. Its goal: to be the trusted guide for Net newbies, helping to install computers and set up networks and training people. Its Web-based courses deliver margins as high as 90%. Internet Access: Gateway was the first PC company to set up its own ISP, in 1997. It then partnered with AOL, which now operates its access service. Gateway is expected to rake in Net access revenues of $163.3 million this year. Portal: Gateway.net, the company's Web portal, which is co-managed with AOL, offers visitors the same range of information, community, and personalization that they can find on well-known portals like Yahoo! Gateway makes its money via advertising. E-commerce: The company sells software and peripherals via its portal, which is expected to bring in $575 million this year, up 77% over 1999. Now AOL and Gateway are planning a host of new services, including software on a kitchen Web terminal to analyze recipes. DATA: GATEWAY, SALOMON SMITH BARNEY, CREDIT SUISSE FIRST BOSTON, DATAQUEST INC. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Gateway's Big Gamble TABLE: The PC Maker for the Internet Generation RESUME: Theodore W. Waitt Weitzen Country INTERACT E-Mail to Business Week Online

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