The company intends to trim expenses to $200m or less, from about $250m, and reduce overall costs by about $400m for the year. Lowering expenses helps Gateway lower its break-even point, which will allow the company to return to profitability more easily and quickly. Gateway's product plans involve realigning its PC business by offering the same prices in remaining stores as it gives when selling directly to customers. It also intends to bring to market new products, including business servers, a new line of consumer-electronics products and an update for the all-in-one Profile PC, dubbed the Profile 5. "We have to strengthen our value-leadership role...across PC products and other products," Ted Waitt, Gateway's chief executive officer said during the post-announcement conference call. Also, he said, "there's going to be a lot of effort in terms of repositioning our retail stores. We are going to invest -- we are committed to our retail sales channel -- but we have to do some work." For example, he said the company will need to update merchandising methods and store layouts to boost their effectiveness. Other new Gateway products will include notebooks, at least one new tablet PC, low-priced PCs and a new line of Gateway-branded accessories, such as keyboards, or USB storage devices. The company said it will begin releasing the gear next month and continue throughout the year. The PC maker is also planning new services and is looking into forming new relationships with business resellers and expanding its business sales force. Gateway intends to use its stores as a base for expanding its consumer-electronics effort. The new line of Gateway-branded products will be similar to Gateway's 42-inch plasma display, introduced in late 2002, the company recently said. The company has also indicated that it is exploring potential new products, such as handheld devices. Analysts have said that Gateway needs to adopt a new, more cost-conscious strategy in order to return to profitability in the current market. "I agree with (Ron Sherwood's) strategy to close more stores and continue to run the stores that are profitable with high foot traffic," said Brooks Gray, an analyst with Technology Business Research. "Closing down the Hampton, PC manufacturing) facility, which I believe to be extraordinarily underutilised would be my second move." But to Gateway's credit, Gray said, "I'm seeing quick, decisive action being taken by the management, right now. More than ever, I feel that the management team is taking action to hasten the path to profitability."
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