Sun agrees to sell Gateway’s "Hairballs"

The history of the computer industry is rich with companies making strange

bedfellows, most notably the IBM and Apple alliance in the early 1990s. This

week, Gateway and Sun Microsystems announced they are teaming up in a deal in

which Sun will be pushing Gateway desktop systems as part of a one-stop shopping

solution.

Strange, because Sun has traditionally battled the very existence of Windows

PCs and products, which, company CEO Scott McNealy repeatedly refers to as

"hairballs" because of their complicated setups. And, analysts said

they doubted Sun’s sales force would be effective in selling Windows-based

desktop solutions. Gateway, of course, has been selling its computers

exclusively through its Web site and some 240 Gateway Country stores. Besides

Sun, the company said it had agreed to invest $50 million in the 1,000-store

OfficeMax office supplies chain, which will carry the Gateway PC brand as its

only computer vendor.

Gateway officials said deals like these would broaden the sources through

which the company generates revenue and help boost sales three-fold to $30

billion by 2004. The Sun deal will help Gateway reduce its reliance on the

consumer PC market, which accounted for 60 per cent of its $8.65 billion in 1999

sales. Sun's customer base is almost exclusively corporate.

But, analysts said they doubt if either Sun would be able to effectively sell

Windows PCs or that corporate customers would readily switch from Dell, Compaq

and IBM to Gateway, just because Sun will be pushing the machines. Under the

terms of the deal, Gateway will be the exclusive provider of desktop PCs and

portables for Sun customers through June 2001. Sun's sales force will push

Gateway products, and Gateway can establish a direct relationship with the Sun

customers after six months. In return, Gateway will include some of Sun’s

software onto its machines so that the PCs work better inside corporations that

use Sun computers to run their networks.