In computer news this week, 10/10/2001

The coming great personal computer vendor shakeup...........

This is an industry that eats its young and orphans thousands. The pc revolution is littered with names of dead computer companies. For the first 7 years - starting in 1975 - before the introduction of the IBM pc in 1982 - there were dozens of computer companies - and the only survivors are Apple, Hewlett Packard, and Radio Shack. Tombstones named Cromemco, Polymorphic, and Altos remind of us the casualties of this first generation of microcomputers.

Then came the generation of the pc compatibles during the 80's and the 90's - in which the mighty IBM first dominated and then totally lost the market it had created, and became outsold by clone computer companies such as Dell, Gateway, and Compaq. And again tombstones are named Leading Edge, AT&T, and Northgate And now in the year 2001, the market faces conditions it has never faced before - the point of saturation - and many people are on about their 4th or 5th pc.

The role of the pc has been totally redefined by the consumer marketplace, turning it from a business device into an internet communications and entertainment device.

The traditional pc is considered almost obsolete, and we have seen the introduction of palm computers, and internet-only devices which just allow internet surfing and email. Children see pc's primarily as educational and entertainment devices

The cost of complete new pc systems has dropped to as low as $ 500 in Costco displays. Declining profit margins and market saturation is going to result in the disappearance of more traditional pc vendors.

Compaq is merging with Hewlett Packard; both are survivor companies, and are solidly entrenched in the consumer marketing pipeline of Costcos, and Office Depots. Apple will always have its small market niche. Dell computers has emerged as the overall direct-market leader. Some people still only buy IBM because of that big blue security label.

Which causes us to look at Gateway computers, one of the past darlings of the marketplace with its cute cow ads and cow shipping boxes that became almost status symbols.

Gateway shocked analysts by opening up a national chain of its own computer stores - going backwards in time and against all industry trends. The oddest thing is that you can't actually buy a computer at their stores - you can look at computers and order one and wait for it to be delivered, or you can do the same thing on the internet and save your gas and avoid the traffic. I've never been able to understand this.

But even worse was Gateway's colossal marketing gaffe this year of running tv ads about how important their employees were to them, and then laying off thousands of them in a grotesque financial panic.

And no matter how cutesy the current Gateway ads are, with their president Ted Waite discussing his new secret strategy with cows, they are a company in the crosshairs.

And I say this as the owner of several Gateway computers in my business, but hey, I've been orphaned before.

For Raw Bytes, This is Frank Delaney

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