Stung by what company officials describe as declining customer satisfaction and lower traffic at its network of stores, Gateway has announced sweeping changes designed to bring customers back to the direct-sale computer vendor.
The company will simplify its product line, improve service, and refocus its efforts on PC sales after more than a year of emphasising "beyond-the-box" services and novel devices such as Internet appliances.
Gateway also plans to reduce prices on its products in the increasingly competitive PC market.
"Gateway has become just average at customer service, and that's not good enough," Ted Waitt, the company's energetic, pony-tailed founder told a meeting of investment analysts here. "The company out there with the highest customer satisfaction level basically wins. Period."
Waitt, 38, returned as chief executive officer of the 20,000-employee company in January after spending a year away from direct operational control as chair. He has immediately named a new management team to help implement the strategy, and has ensured their focus by tying 50 per cent of their annual bonuses to customer satisfaction.
While Waitt and his team emphasise that Gateway has not lost market share during the past year (it accounts for about 15 per cent of annual PC sales in the US), they depict a company that has strayed from its roots. For example, Gateway used to derive more than 50 per cent of its business from repeat customers and word-of-mouth referrals. Last year that percentage was down to the mid-30s, they say.
The announcements came as Gateway restated its financials for last year, taking an additional charge of $US80 million to fourth-quarter earnings.
The company says its new moves will result in an additional charge of $150 million to $275 million in the first quarter of 2001, including a previously announced $50 million charge for eliminating jobs. Not counting the one-time charge, Waitt says, the company expects to break even for the first half of this year and return to profitability only in the second half.