Reading through
the titles of
various tech-related articles yesterday, I was well aware of
what the date was. So I didn't bat an eyelash when I read that
Bill Gates had switched to the Mac, or that Steve Jobs had
sold all his stock (or was it his socks?). And when I saw the
story about Gateway closing all of its remaining retail stores,
I thought for a moment that April Fools pranksters were being
a bit harsh by joking about something that would probably happen
within a few years anyway. But then I realized that the story
was real. Gateway really is closing its stores. All of them.
They're done. In fact, if Gateway hadn't bought out eMachines
earlier this year, Gateway would be going out of business entirely
right about now. And then it occurred to me: Gateway did, in
fact, go out of business. Let me see if I can explain how.
If I were
in charge of a company that was bleeding to death and and
I knew that it was going to die before long, this is the escape
plan that I would follow:
1) Use my
company's leverage to buy out a smaller, healthier company
in the same market.
2) Cease
all the operations of my own company.
3) Take solace
in the fact that not only did I manage to preserve the name
brand of my own company, I'm now in charge of a new company
instead of being unemployed.
It's a good
plan. Of course, it only works if you don't then turn around
and do the same stupid things to your new company that killed
your old company. But in any case, it's clear to me that Gateway's
Ted Waitt chose to have his company purchase eMachines so that
it could die gracefully instead of just dying. It's not as
if we couldn't see this coming. In fact, less than two months
ago, I wrote the following regarding the merger:
"As Gateway
faces the reality that it's going to have to close more and
more of its own stores just to survive, the acquisition of
eMachines gives Gateway instant inroads with retailers such
as CompUSA and Best Buy. Meaning that if the time comes where
Gateway has to swallow all pride and begin to place its computers
in such retailers, the partnerships are already in place."
So it while
would appear that I was accurate in predicting that Gateway
using the eMachines acquisition as an easy way into retail
partnerships, I was looking at things from the wrong side.
Gateway execs didn't make this move in order to put Gateway
in a stronger position, they made the move to put themselves
in charge of eMachines. Lets's take a look at the moves that
the company has made post-merger, and you tell me if you don't
agree with my assessment:
1) Gateway
bought out eMachines
2) Gateway
laid off most of its own employees at its San Diego headquarters
and then relocated its headquarters to Orange County, the location
of most of eMachines' employees
3) Gateway
named eMachines CEO Wayne Inouye the new CEO of Gateway
4) Gateway
closed all of its Gateway Country Stores
See the pattern
here? At this point, there's almost nothing left of Gateway
but the name. But because Ted Waitt was smart enough to make
things play out this way, computers bearing the name brand
"Gateway" will be around for years to come. All Gateway has
to do is work out deals with eMachines' existing retail partners
to get Gateway computers on the shelves of those same retailers,
and Gateway-branded machines will live on for some time. If
you have to go out, it's not a bad way to go out. Plus, as
I said, Gateway's failed executives now get the chance to screw
up what has been working for eMachines.
So what killed
Gateway? Was it just the fact that they opened retail stores?
Nah, I don't think so. Apple has proven that retail stores
don't have to be noose around a computer maker's neck. Was
is the fact that Gateway went out of its way to market itself
to those who think of themselves as being a bit outside the
mainstream? No, again, Apple has proven that this can be done.
So really, what was it? I believe it's fairly simple: Gateway
decided that they were going to take all of these maverick
steps while still offering the exact same identical, uninspiring,
crippled Windows-based computers as everyone else. In other
words, no matter how Gateway tried to dress things up, they
couldn't offer anything that anyone else couldn't offer.
Apple, of
course, has no such problem. While Apple will never be the
biggest computer maker, its maverick actions generally work
out well because it's got actual products to back them up.
Apple's offerings are are different, and in many aspects remarkably
better, than what any other computer maker can offer, meaning
that when the company does something like opening up retail
stores across across the nation, customers can come in and
find out about those unique and superior offerings. But with
Gateway stores, what was the company showing customers? Nothing
that they couldn't go home and order from Dell or eMachines.
Selling a
Windows-based computer is a double-edged sword. On on hand,
you're associated with the Windows operating system, which
most people mistakenly think is the only operating
system. That misconception works wonders in your favor. But
on the other hand, Windows is just terrible, so far behind
the curve in fact that there's almost nothing that you as a
vendor can do to avoid having to sell Windows-based systems
that are just plain crappy. Gateway's problem was that it tricked
itself into believing that some way, somehow, it could overcome
the fact that it was selling Windows-based systems. Clearly,
the way to go, if you're a Windows-based computer maker, is
to make no attempt whatsoever to enhance the product beyond
what it is, to make every attempt to manufacture Windows-based
systems at the lowest possible price, to spend the least amount
of money possible in the actual selling of the systems, and
to take that extra money and spend it on a ridiculous amount
of content-less advertising that makes your brand name a household
name.
In other
words, if you're going to sell Windows-based machines, try
to be Dell. Dell offers customers nothing beyond what anyone
else does, the only research they do involves figuring out
how to use three less screws on the assembly line, they sell
their computers online, over the phone, and in cheaply-constructed
kiosks, and they advertise some vague notion of "Dell quality"
that means nothing but puts warm fuzzies in the minds of consumers.
And it works. So the question now for Gateway (or should be
just begin calling them eMachines?) is whether they can resist
the temptation to drag their newfound company down the same
of putting so much lipstick on a pig, that the pig is no
longer valuable as a pig.
It didn't
have to be this way, if only Gateway had decided to go with
something other than Windows so that the company could have
actually made good on its attempts to offer customers more
than what the competition could. Actually, on second thought,
I suppose it did have to be this way. Apple isn't keen on licensing
MacOS X, and Linux isn't a viable consumer system, so Windows
was their only option. With that in mind, they might have
done better not to try at all. Hey, it worked for Dell.
Let's see
if Gateway's executives figure that out, as they begin their
new careers at eMachines. And if they find they can't live
without the rebel flag after all, then hey...I hear Apple's
hiring.
No
Panther user should be without:
