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Gateway spurs pricing fray
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May 30, 2001: 2:09 p.m. ET
PC maker vows to beat any of its competitors' prices on PCs, servers
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NEW YORK (CNNfn) - Gateway on Wednesday picked up the gauntlet thrown down by its rivals in the computer business, vowing to beat their prices on new PCs or servers.
Starting Thursday, Gateway (GTW: Research, Estimates) said that for a limited time, customers who present an advertisement for a competitor's system will be offered a comparable Gateway system for a lower price.
To be eligible for the program, customers must present a current ad from Compaq (CPQ: Research, Estimates), Hewlett-Packard (HWP: Research, Estimates), Dell (DELL: Research, Estimates), IBM (IBM: Research, Estimates), Sony or Toshiba for a new PC or server with minimum specifications at least equal to Gateway's minimum specifications.
Consumers are entitled to one PC at the discounted price, and businesses are entitled to up to 10 PCs or servers at the discounted price. The program -- which Gateway will advertise under the advertising slogan "PC Price War ... ? Cool." -- cannot be combined with other offers or discounts and excludes liquidation sales, auction sales, limited-quantity items and Gateway products not sold directly by Gateway.
Executives of Gateway said the new pricing program - its response to the PC price war sparked by Dell and Compaq, the top two suppliers - will not prevent it from breaking even, on an operating basis, during the first half of the year. In the second-half, Gateway sees unit sales recovering and projected a return to operating profitability.
The company made that projection when it reported its first-quarter earnings on April 19. At that time, Gateway Chief Financial Officer Joe Burke acknowledged that there were some competitive pressures in the PC industry but balked at calling it an outright "price war."
"This is the right thing at the right time, both for our customers and our business," Gateway co-founder and CEO Ted Waitt said in a statement. Wednesday.
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"It is exactly this kind of aggressive move that will ensure our long-term success and return to profitable growth in the future," Waitt added,
The company said it expects the new pricing offer will drive sales growth in unit terms but could erode its gross margin, a measure of sales minus the cost of goods sold and expressed as a percentage of revenue.
The San Diego-based company on Thursday plans to launch an advertising campaign promoting the new pricing program with broadcast and cable TV ads, as well as a full-page ad in USA Today and dozens of local daily newspapers across the country.
Shares of Gateway were down more than 2.5 percent in afternoon New York Stock Exchange trade Wednesday amid a broader decline in the technology sector. 
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