Is this the Gateway (NYSE: GTW) to redemption? Gateway has made yet another step toward wooing consumers in the retail space. Today, it announced that its computers will be available in CompUSA stores.
If you recall, Gateway ditched its own retail stores back in April, though it still offers direct telephone and Internet sales. It is already featuring its wares in Best Buy (NYSE: BBY), Costco (Nasdaq: COST), and Office Depot (NYSE: ODP); the Best Buy hookup led Foolish colleague Rick Munarriz to predict that more big-name electronics retailers might come on board, which indeed seems to be coming to pass.
In the aisles of CompUSA, Gateway will directly compete with rival Hewlett-Packard (NYSE: HPQ), which handed out some degree of quarterly disappointment last week. Overall, both companies of course contend with the PC provider that many see as the market leader: Dell (Nasdaq: DELL), which delivered shining results last week. And of course, there is Apple (Nasdaq: AAPL) and its loyal following as well.
Indeed, it's good news for the PC retailer, which has had tough times in a very competitive space. Unfortunately, today market research firm Gartner dampened its outlook for PC purchases, which had been looking pretty good. (Last quarter, Gateway reported a 62% increase in PC shipments over the same period last year.) Last quarter, Gartner expected a 13.4% increase in PC shipments for the year; now it has ratcheted the number down just a tad to a 12.6% increase.
It shouldn't be too surprising to anyone that the high gas prices, rising interest rates, and other pressures might make some consumers think twice before buying new computers. Though who knows, maybe Gateway's low-priced strategy will help it excel in such an environment.
Shares of Gateway increased more than 5% in recent trading as the deal puts Gateway into CompUSA's 226 retail stores and on its website. Investors like Gateway's cash cushion as well as CEO Wayne Inouye's vows to bring the company back to profitability by 2005 after years of losses. However, although today's deal is definitely another good sign that Gateway's making the right moves, there remains the possibility of some tough months ahead as well as high-profile competition.
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Alyce Lomax does not own shares of any of the companies mentioned.
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