Gateway Ups Holiday Ante with 2-for-1 PCs

In a first for the PC industry, Gateway has announced it will entice holiday shoppers with a "buy one, get one free" PC deal .

Specifically, Gateway customers who purchase the company's high-end machines -- the 700XL desktop and 600XL laptop, which retail for US$3,499 and $2,399, respectively -- will receive a free 300s desktop, without a monitor. Shipping on the free machine also will cost extra.

The 700XL and 600XL each include a Pentium 4 processor, running at 3.06 GHz and 2.2 GHz, respectively. The free 300s has a 2 GHz Celeron with 128 MB of memory and a 40 GB hard drive.

The Poway, California-based company also is offering free shipping and handling to further encourage online ordering.

Gateway spokesperson Greg Lund told the E-Commerce Times that although the company has bundled its PCs with other products in the past, this is the first time it has given away a PC as part of a sales offering. The sale, which started last week, does not have an end date, he added, though it is a holiday promotion. Besides being offered online, the deal also is available at Gateway retail stores.

Holiday Sales Drag

The deal announcement comes just weeks after Gateway CEO Ted Waitt told an audience at the Credit Suisse First Boston conference in Arizona that the company would revise its fourth-quarter estimates downward if a weak PC replacement market and sluggish holiday sales continued.

In October, the company said it anticipated a fourth-quarter loss of between 10 and 13 cents per share on full-year sales of $4.3 billion to $4.5 billion. For the year, Gateway's losses will total nearly $310 million, excluding charges, following a $1 billion loss in 2001, including charges.

"Gateway hit a wall in the December quarter of 2000 and has yet to recover," Morningstar.com analyst Joseph Beaulieu wrote in a research note. "The combination of a maturing PC market, an economic downturn and intense price competition has devastated revenue growth."

Lund said that because of a quiet period the company is undergoing, he could not comment on Gateway's holiday sales performance or customer response to its PC special.

IDC U.S. portable PC analyst Alan Promisel told the E-Commerce Times in an earlier interview that he expects PC holiday sales to be relatively flat compared with last year. "I think there will be a push on the high-end desktop space, but as for the mainstream, really high-volume desktop shipments, I don't think they will reach the levels of 1999 and 2000," he said.

Diversification Required

Gateway has battled the weak PC market by expanding its consumer electronics offerings.

This fall, the company said it would begin selling more than 150 electronic devices produced by other companies, including digital cameras, MP3 players, digital video gear, software, printers and accessories, at its store locations.

All products, according to Gateway, have undergone testing to ensure compatibility with Windows-based PCs.

At the same time, Gateway released its own branded, 42-inch digital television. The company also is selling other entertainment products, such as satellite and digital cable service, home theater options and other digital media products.