Gateway launches two rack servers

Faced with slumping sales of its PCs, Gateway Inc. is determined to improve its standing among corporate customers by bolstering its server lines and adding storage products later this year, a company manager said Monday. Gateway also announced that it launched two new rack servers with Intel’s Xeon processors.

Most of Gateway’s resources for new business investment will flow to servers and other enterprise IT equipment over the year, said Scott Weinbrandt, general manager of the Poway, Calif.-based company’s systems and networking products group. The traditionally consumer-focused company plans to add storage products by the third quarter of this year to its line of enterprise IT hardware, he said.

The launch of the 1U (1.75 inches) Gateway 955 series and 2U Gateway 975 series rack-mounted servers are the seventh and eighth server lines launched by Gateway. Both servers are dual-processor capable, but ship with only one processor. They come with dual Gigabit Ethernet ports, and two PCI-X (peripheral component interconnect – extended) slots for additional I/O capacity.

A base configuration of the 955 series with a single 1.8GHz Xeon processor, 256MB of ECC (error correcting code) DDR (double data rate) memory, an 18GB Ultra160 SCSI (small computer systems interface) hot-swappable hard drive, and Gateway’s Server Manager software for $1,699. The 975 series starts at $2,199 with a single 2.4GHz Xeon processor, 512MB of ECC DDR memory, a 36GB Ultra320 SCSI hot-swappable hard drive, and the Server Manager software.

Customers can configure their own servers with additional memory and faster processors up to Intel’s latest 3.06GHz Xeon. The servers will only be available in the U.S.

The company will have a tough task ahead as it focuses on the Intel server market, currently dominated by Hewlett-Packard and Weinbrandt’s former company, Dell Computer, Gateway hopes to increase its market share by selling to its traditional strength among government and educational customers, Weinbrandt said.

However, market research company IDC recently revised its 2003 PC forecast lower due to a sharp decline in public sector spending.

The other prospects for Gateway lie among small and medium-size businesses, where the company hopes to take revenue away from white-box vendors through strong customer service and support, Weinbrandt said. White-box vendors sell servers and PCs without a name brand such as HP’s Compaq Evo, Dell’s Dimension, or Gateway’s self-titled products.

Alongside services and support, those vendors are able to sell their products at lower prices than the bigger vendors in most cases, but Gateway thinks it can offer better customer service, Weinbrandt said.

Gateway is looking at adding four-way servers to its product line, but won’t introduce an eight-way server anytime soon, Weinbrandt said. The company is also looking at the possibility of bringing Intel’s 64-bit Itanium chip to its server products, he said.

Layoffs and losses have been the primary story at Gateway so far in 2003, but the company is hoping the higher margins from servers help shore up the company’s bottom line. In January, Gateway reported a fourth-quarter net loss of $72 million with revenue in that strong consumer quarter falling more than $1 billion as compared to the previous year’s fourth quarter.

Last month, it cut 1,900 jobs and announced plans to close 80 stores, trying to reduce expenses by $200 million to $250 million. The cost cutting is expected to bring the company’s cash position to about $1 billion, which will fund the investments in the server business expansion, Weinbrandt said.