Gateway declares PC price war

The day after America's Memorial Day holiday weekend, computer maker, Gateway declared war on the rest of the brand name PC industry, by vowing to undercut the prices of Dell, Compaq and other major competitors in order to regain lost marketshare. Ted Waitt, Founder, Gateway who took back the position of CEO in February, said that Gateway would beat the advertised prices of any competing brand name computer from Compaq Computer, Hewlett-Packard, Dell, IBM, Sony or Toshiba by one dollar. In effect, any of these companies' advertisements become Gateway's ad.

Waitt also claimed that he is willing to sacrifice short term profitability in exchange for marketshare growth. "From our perspective, there has been a price war in the PC industry since we opened for business in 1985. So we are veterans of this-in fact, we love it," Waitt said.

Gateway this week started a major ad campaign called 'The Gateway  Guarantee'. The advertisements that will be published in all the major newspapers, carries a provocative tag line: 'PC Price War…? Cool.' The Gateway Guarantee invites customers to come into one of 300 Gateway Country stores, call 1-800-GATEWAY or log onto
www.gateway.com. Customers, who provide an ad from a competing company for a similar product Gateway carries, will be able to purchase the Gateway system for $ 1 below the price listed in the competitor's ad.

Waitt said the increased sales volume would enable the company to return to profitability in the second half of the year. He added that Gateway has room to bring Gateway's operating costs in line with Dell's, that were 10.7 percent of sales. Gateway's costs were at 18 percent of sales in the first quarter. IBM, by comparison, had a ratio of expenses to sales of 24.3 percent. Analysts said the Gateway move is a battle of last-man-standing that could prove very costly, especially to the higher cost companies like IBM and HP.