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Gateway chief: It's not about PCs

Gateway no longer means just cows and somewhat cool computers. Now, it also means selling Internet access.
Written by ZDNet Staff, Contributor

"If all we wanted to do was to make money on PC hardware, that wouldn't be a good business model," said Ted Waitt, Gateway's chairman and CEO, in an interview with ZDNN Wednesday.

Gateway , based in San Diego, California, solidified its position as an Internet service provider with a new deal for a personalised portal based on Yahoo! . Starting Friday, the default home page for Gateway.net subscribers will be a Gateway-specific My Yahoo! personalised page. "For a hardware maker, there is not a lot we could offer, but Gateway.net is an ISP," said Jerry Yang, Yahoo!'s Chief Yahoo!, during the same interview. "There are a lot of things we can do with an ISP like Gateway.net."

Gateway counts ad revenues among the benefits of the deal, Waitt said, adding that about 50 to 60 percent of all Gateway customers use the company's Internet service. That's not a bad market for advertisers to tap, when Gateway's share is growing faster than the PC market, according to market researcher Dataquest. The firm tallied a total of 38.4 percent growth in the U.S. market in 1998.

That growth comes even though Gateway does not compete in the fastest growing segment in the market: Sub-$1,000 (£600) PCs. "We have every intention of playing in that market," said Waitt. Last week, PCWeek reported that the company would be the first big direct PC maker to break ranks with Intel and start using processors from Intel rival Advanced Micro Devices.

Waitt all but confirmed the deal, saying "The CPU is the one area of the machine that has not come down the cost curve like other parts of the PC. AMD has done a good job of making a lot of CPUs and they will be making a lot this year as well."

With the success of low-cost PC maker Emachines -- which grabbed 6 percent of the retail market in its first quarter of sales -- competing at the low end is a must for consumer-oriented Gateway.

"We have product on the drawing board at those prices," Waitt said. "And if somebody can play in that space through a two-step distribution model like Emachines, we can do it better through a direct model, because it's more efficient."

"The more people want a low-price product, the more we can offer," he said

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