Yes, Gateway (NYSE: GTW), you can come home again. The company that carved an edgy niche in personal computers with its cow-patched boxes in the 1990s, only to load up on consumer electronics gadgetry, has returned as a force to reckon with in the computing space.
Its eMachines acquisition earlier this year helped move 795,000 PC units this past quarter. While the 62% improvement in volume is obviously not organic, that's merely a technicality at this point. No one questions a giant when it's throwing its girth around.
This isn't to say that Gateway is a giant to anything beyond an ant colony of Commodore and Tandy users. The company is still dwarfed by Dell (Nasdaq: DELL) and Hewlett-Packard (NYSE: HPQ). Even music-happyApple (Nasdaq: AAPL) moved more of its pricier Mac systems last quarter.
But the eMachines marriage is starting to bear fruit in the retail distribution channels. The company will be teaming up with Best Buy (NYSE: BBY) to put out Gateway-branded systems. While eMachines has been a staple at the consumer electronics superstore for ages, the Gateway systems will be marketed at higher price points.
With Gateway shuttering its own stores, this handshake is more important than just a way to move some computers and rebuild a brand. Establishing working relationships with retailers will be critical if it continues producing plasma television sets. Even though it's had no problem moving them through its website, home theater is a much easier sell when it's experienced firsthand. With leader Best Buy on board, it may not be long before others such as Circuit City (NYSE: CC) and RadioShack (NYSE: RSH) come calling.
Given the shift in its direction since its merger with eMachines, it's only natural for the company to post a loss. Gateway's been doing that for years anyway. But if you back out the litany of onetime charges in its $0.91-a-share loss for the June quarter, it's the smallest deficit posted by the company in over 2 years. It remains on track to turn profitable next year.
While the company's juicy cash balance is down to barely $2 a share after doling out cash and stock for eMachines, that's still a pretty big mattress for the company to fall back on if it stumbles as a newlywed.
So, Gateway's coming back to the farm. Let's hope it's not rusty with its milking techniques.
Would you be more willing to buy a Gateway-branded machine at a Best Buy than directly through Gateway? Do you need to upgrade your computer, or can its shortcomings be corrected? All this and more -- in the Help with this STUPID Computer! discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz has a pair of low-end Gateway computers in the house, but he toils away on his HP computer and Dell monitor. He does not own shares in any companies mentioned in this story.
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