Gateway to drive growth in Europe from Dublin base

Mr Todd Bradley, Gateway's recently-appointed top man at its Dublin-based European headquarters, is nothing if not blunt

Mr Todd Bradley, Gateway's recently-appointed top man at its Dublin-based European headquarters, is nothing if not blunt. That, along with a willingness to be tough as needed, is the reputation that preceded a man used to managing the European operations of US companies after stints with Federal Express and Transport International Pool, a GE Capital Services company.

He will amicably talk shop and ramble through a range of topics - stocks, the latest Internet company initial public offerings, the Irish digital industry, the electronic gizmos on offer at the massive German technology exhibition, CeBIT. But the boyish, look-'em-straight-in-the-eye senior vice-president for Europe, the Middle East and Africa begins an interview by cutting to the chase.

"Gateway is in the midst of a pretty huge change right now," he notes in his US drawl. "I mean, we have 10 new executives out of 18." It's not exactly a point most companies would emphasise about their global management, but Gateway sees the changeover as a long-needed spring cleaning as it eyes ways of expanding markets in its highly competitive sector.

Mr Bradley's appointment last August to a position specially created for him, has had reverberations throughout the European operations of the number two computer manufacturer in the world, from the highest levels down. As a direct consequence of Mr Bradley's arrival, several executive appointments were made to the Dublin European headquarters before a more aggressive pursuit of markets outside the US.

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Before the decision to revamp European operations, revenue in Europe had remained flat in the five years Gateway has been based here, even as competitors such as PC vendor Dell did well. At the moment, only 15 per cent of the firm's revenue comes from outside the US. Last quarter, sales grew 20.9 per cent in Europe, but tight margins meant that translated into a tiny 1.6 per cent growth in revenue.

Yet Gateway obviously has been playing its game correctly in the US. The company has enjoyed record profits in recent quarters and is expanding by half its manufacturing presence. Analysts predict the company will beat expectations when quarterly results are revealed towards the end of next month.

Mr Bradley says that some of the firm's problems in Europe were due simply to the change in the computer market. "When Gateway came in five years ago, it was based on an enthusiast model," he says. "Since then it has evolved, and went much more mainstream." But, he admits, in Europe "Gateway was somewhat leaderless for a year".

The company was testing a number of organisational approaches, he says, and thought regional offices might function best as satellites controlled from the US, with a flat management structure within the offices themselves. That model failed, he says. "I think the regions didn't get the kind of leadership that was needed."

"Our focus right now is really how we drive more growth into Europe," says Mr Bradley. That has meant the introduction of some radical changes in the running of the Dublin office, the way the king of online computer sales markets its machines and even in the way the company defines itself.

In the first instance that has meant a lot of change at senior levels in the Dublin office, and a tougher line on performance taken by Mr Bradley. Earlier this year that seemed to trickle down to the employee level in a negative way. Some telesales employees complained they had been threatened by managers with immediate job losses if they did not close a greater number of sales.

The most visible change for the company which pioneered selling machines over the Internet - a model which other newcomers were quick to follow and which has been inexorably forced on more traditional manufacturers like Apple and Compaq - is the advent of the bricks and mortar Gateway Country Store.

The company has swiftly rolled out 150 of them in the US, where many analysts are bullish on the concept because they believe the stores will lure customers in the last market to remain relatively untapped, small to medium-sized businesses.

According to Gateway's director of marketing for EMEA, Mr Michael Maloney, those are the places which have not made major investments in computers and customers like to see and try out the machines before making purchases.

But significantly for the European market, the stores seem to appeal to the way Europeans want to buy, he says. With the lower take-up of the Internet in Europe, Gateway reaches fewer customers through the medium. So, they have positioned six new British stores on high streets where Mr Bradley says visitors get a feel for machines which they may order later by phone or through the Internet.

"People will generally go into a store four times, call us five times, and visit us on the Web seven times before making a purchase," he says. "These channels all complement each other. European distribution channels are just totally different from the US."

But Gateway has also begun a makeover on an even larger scale as it rethinks its positioning for future markets. A recent deal with Internet portal Yahoo coupled to its gradual move into - of all things - the Internet service provision market, has brought the maker of monitors and computer boxes into the Internet content market.

Gateway now offers its computer purchasers a free Internet subscription to its Gateway.net service and, even more radically, offers the same free Net access to anyone in Britain who signs up at its website or picks up a free access disk in the Country Stores.

Mr Bradley says Gateway plans at the very least to introduce free Internet service to Irish buyers as well, probably by the third quarter of this year and is considering offering free access in general, as per the British model. The approach follows a trend begun by electronics retailer Dixons in Britain and if brought to the Irish market, would seriously change the competitive landscape for Internet service providers (ISPs).

According to Mr Bradley, "coming behind [that strategy to build a subscription base] is a whole content strategy". By pairing with Yahoo, Gateway hopes to gain a strong position on the consumer desktop and drive hardware and software purchases to either itself or other retail partners such as peripherals vendor NECX.

The company also expects to start using the Internet increasingly for customer service - from placing troubleshooting guides online to offering live customer service representatives through an online "chat" facility.

In addition, says Mr Bradley, "personalisation" is a key word. Consumers can fine tune their Yahoo link to deliver information on stocks, news headlines, weather, new computer products and any other area of interest.

The hope is that such content will be delivered via a Gateway product - a computer or, as will increasingly be the case in the future, say industry analysts, a lightweight, low-cost device for accessing the Net. Gateway already is considering such devices for its product portfolio, says Mr Bradley.

All in all, he says, Gateway has made a shift "from an integrator of computers to an integrator of solutions". The market will quickly decide whether the move has been a wise one. In the meantime, Mr Bradley is enjoying the shift from the world of shipping packages to flogging computers.