Osborne legacy passed onto Gateway

Gateway's decision to axe its Australian operations Wednesday comes after five years of struggling to find a place among the more established industry brands.

The San Diego based company first set foot in Australia in 1996 when it acquired what was left of the now defunct Osborne Computers.

According to those close with the company, Gateway's problems began the minute it arrived in the local market. "I strongly feel that the first mistake Gateway made upon entering the Australian market was to disband the strong network of stores which was Osborne," said Val Myott, Managing Director of Pure Logic, a former authorised associate of Gateway. "They tried to push the American direct marketing model and in doing so neglected the personal shop front approach Australians are used to."

When Gateway first entered the Australian market, its market share was 1.3 per cent and by 2000 its share had only risen to 2.7 per cent, according to IDC. This ranked Gateway tenth in the market, well behind Compaq (13.6%), IBM (12.4%), HP (9.9%) and Dell (7.4%).

This lack of market penetration is being attributed to the company's unwillingness to promote a retail business and a recent partner program with Telstra did little to resolve this. "Trying to sell Gateway PCs through Telstra didn't work because people want to buy a computer from a computer shop where they know they can get appropriate service," explained Myott.

In addition to the problems associated with their marketing, Gateway also made business difficult for resellers. "Pure Logic was an authorised associate of Gateway and although we have the resources to offer technical support, resellers like us weren't allowed to service Gateway machines," added Myott. "This made dealing with customers who had problems a nightmare."

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