October 30, 2000 11:30 AM PST

Gateway puts fashion first with all-in-one PC

How much will consumers pay for style?

Gateway is testing the limits, again.

The San Diego, Calif.-based company on Monday unveiled the Profile 3, an all-in-one desktop computer with a built-in flat-panel LCD monitor and a Pentium III processor.

But, while aesthetically elegant, Gateway faces an uphill battle. At $1,999, the Profile 3 certainly isn't cheap compared with computers of its class.

History has also not been kind in this regard. The first two Profiles have not been huge sellers, and neither has the Gateway Astro, an all-in-one with a standard CRT monitor.

"The Profile 3 will appeal to people who want style over substance, but maybe nobody else," said PC Data analyst Stephen Baker.

Added Gartner analyst Kevin Knox: "Price is the problem that a lot of these all-in-ones have...There's just not much of a market for that product category. Period."

Although style became a major issue in PC marketing with the debut of the iMac in 1998, manufacturers seem to have committed more fashion don'ts than dos. Most of the stylish PCs have come with higher price tags, and many have failed to ignite the public's imagination.

About 10 months after launching the WebPC, which could be bought with a flat-panel monitor, Dell Computer abruptly pulled the plug on the model.

Similarly, Apple, which started the style push, has experienced lower-than-expected sales for its G4 Cube. Cube owners have also complained of mold lines that allegedly mar the smooth, clear surfaces. Sales of iMacs also have slowed, according to analysts.

Compaq and Hewlett-Packard have seen quick acceptance of their sleek iPaq and eVectra corporate computers, but both of these have an appeal beyond looks. Because of their relatively small size, they can be cheaper and easier to manage than standard PCs.

Gateway hasn't found great success with the Profile family, analysts say, but the company certainly has been persistent. Several analysts described the Profile 2 as a sales failure, which they say explains Gateway's current aggressive pricing on it.

While it is difficult to pinpoint why consumers aren't choosing these models, analysts say it probably comes down to comparative value.

"All-in-one models almost always cost more than a separate desktop and monitor," Baker explained. "You also have limited expandability options."

Versatility is also a problem. In the case of the Profile 3, consumers in some ways get less up front, along with limitations on what they can add later.

Rather than using a separate graphics card, the Profile 3 relies on Intel's 3D graphics built on the motherboard. Memory is expandable to only 256MB, vs. 512MB or more on other consumer systems.

A CD-rewritable drive, a hot-ticket item on desktops, is not an option. Consumers must choose either a standard CD-ROM drive or an 8X DVD drive.

Knox sees a larger problem. Like Apple's Cube, the Profile aims between two markets, with limited appeal in either.

"If you want a powerful system, you're going to want one with expandability; you're not going to go with an all-in-one," he said. "If you want a low-cost system, you're not going to spend $2,000 for an all-in-one."

The Profile 3 is available immediately for $1,999 with an 866-MHz Pentium III processor, 15-inch LCD display, 128MB of memory, 20GB hard drive, integrated video, audio and speakers, and Windows Me.

 

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