1. PC Makers
Presenters:
Oana Constantin
Kevin Ridinger
Adam Svoboda
Cindy Xia

2. Agenda
• Industry Analysis
• Company Analysis
• Dell, Inc.
• Hewlett-Packard Development Company, L.P.
• Gateway, Inc.

3. Industry Definition
• The personal computer industry consists mostly of
assembling and selling:
• Desktops & Notebooks
• Servers & Mainframes
• Workstations & Thin Clients
• Supercomputers
• Mass Storage Devices
• Network Equipment
• Peripherals
• Handheld Devices

4. Nature of Industry
Floppy,
CD/DVD Drive
Hard-drive
Motherboard
& CPU
Power
Source & Extra
Cables Peripherals
Case

5. Industry History (1/2)
• Start of the industry: 1975.
MITS Altair 8080 – First
personal computer
• Hits maturity by the mid-1990s

6. Industry History (2/2)
• New developments beginning with late-1990s:
• Rapid decline in PC prices
 Consequently decrease in gross profit margins
• Acceleration in the product cycle
 Faster depreciation of components and finished good inventories
• Success of direct-sales/build-to-order strategy
 Remodeling of the value chain
• Mergers and Acquisitions
 HP/Compaq, Lenovo/IBM

7. 1995 Worldwide Market Share
Compaq
IBM
Dell
3% 3% HP
3%
7% Apple
4% NEC
47%
Packard-Bell
Fujitsu/ICL
8% Acer
4% Toshiba
3% Other
8%
10%

8. 2004 Worldwide Market Share
16%
6%
HP/Compaq
IBM
Dell
55% Fujitsu/Siemens
18% Acer
Other
1%
4%

9. PC Market Growth
US and Worldwide PC Market Growth
1985 1990 1995 2000 2003 2005 2010
U.S. PC Unit Sales (#M) 6.6 9.5 21.4 46.0 48.3 56.6 66.7
U.S. PC Dollar Dales ($B) 17.2 24.5 56.8 86.9 78.1 84.5 86.1
Worldwide PC Unit Sales (#M) 11 24.2 70.1 130 149 181 249
Worldwide PC Dollar Sales ($B) 29.5 71.3 155 247 243 270 302

10. PC Unit Sales by Region (millions)

11. PC Market Segments (Million Units)
160
140
120
100
80
60
40
20
0
1990 1995 2000 2003 2005 2010
Servers (U.S.) Servers (Worldwide)
Desktops (U.S.) Desktops (Worldwide)
Mobile PCs (U.S.) Mobile PCs (Worldwide)

12. PC Market Segment Growth
Worldwide PC Market Segment Growth for Desktops,
Mobile PCs, and Servers
1990 1995 2000 2003 2005 2010
Desktops 89.9% 81% 74% 68% 63% 55%
Mobile PCs 9.9% 17% 22% 27% 32% 39%
Servers 0.02% 2% 4% 5% 5% 6%

13. PC Market Share of Leading Vendors
50
40
30
20
10
0
1990 1995 2000 2003 2005 2010
Dell (USA) HP/Compaq (USA) Dell (WW) HP/Compaq (WW)

14. Business Models
• Big Box
• Direct
• White Box

15. Big Box Model
• Traditional approach, through “brick and mortar”
retailers and own stores
• Distributors purchase assembled, ready-to-use
computers
• Allows consumers to touch and feel the product
• Higher cost due to high inventories, longer
distribution channel
• Profit margin eroded

16. Direct Model
• Take customized orders directly from end consumers
• Assemble systems as orders come in
• Ship the product direct to customers
• More efficient, JIT inventory system
• Lower costs due both to inventory savings and
distribution by-passing
• Savings are passed to customers

17. White Box Model
• Combination of Big Box and Direct Sales Strategies
• Own distribution facilities
• Allows consumers to customize their products while
giving them a phisical location to purchase
• Highly fragmented, estimated to more than 500
unbranded PC makers
• Often sell directly to small businesses looking for a
significant price break rather than a big brand
machine.

18. PC Industry Value Chain, 2004

19. Models of Production for US Sold PCs

20. Industry Performance
• NASDAQ Computer Index (IXCO)
 Includes 603 securities from categories:
Computer Hardware
Computer Software
Semiconductors
Computer Services

21. Industry Performance: 1 Year
Nasdaq Computer Index (IXCO)

22. Industry Performance: 10 Year
Nasdaq Computer Index (IXCO)

23. Industry Key Measures
• Profit Margin
• Sales Growth
• Market Share Growth
• Valuation Ratios
• Business Capital Spending

24. Industry Statistics
Valuation Ratios Financial Strength
P/E 22.96 Quick Ratio 1.34
P/Sales 1.85 Current Ratio 1.61
P/Book 6.83 LT Debt/Equity 0.31
Total Debt/Equity 0.38
Profitability Management Effectiveness
Gross Margin 31.33% ROI 19.28%
Operating Margin 9.22% ROA 9.94%
Net Profit Margin 10.68% ROE 31.35%

25. Recent Developments
• Lenovo’s buyout of IBM’s PC unit.
• Propelled the company on 3rd place in terms of worldwide market
share (7.6%) for the 2nd quarter of 2005
• Apple switches to Intel processors
• Lenovo investing $84m in new R&D center in North
Carolina
• Dell lowering earnings forecast, plus a $300m charge
to repair faulty circuit boards
• Hewlett-Packard has hired Dell’s CIO, Randy Mott
• Soaring Apple stock price due to strong iPod sales

26. Apple – One Year Stock Price

27. Apple Sales Growth (millions)

28. Future Trends – Industry
• Pricing competition will become more aggressive
 Exit by some smaller players
 Further consolidation through mergers and acquisitions
• PC shipments expected to grow at 6% per year, but
revenues will remain almost flat
 Forces players to further innovate and expand product offering
such as media center computers and tablet PCs
• Faster growth in Europe and Asia segments
 Build strong marketing strategy targeting these segments to
capture market share

29. Future Trends – Technology
• Continued shift from desktops to notebooks
• Shift towards wireless devices
• Adaptive hardware technology to support PC
virtualization
• Continuous movement toward miniaturization and
digital enhancement of portable music players and
phones

30. Dell Inc.
Presented by: Kevin Ridinger

31. Fast Facts about Dell Inc.
 Trades on NASDAQ, symbol: DELL
 One share bought for $8.50 at IPO in 1988 would be worth
$3,800 today.
 Employs over 61,400 people
 Revenues totaled over $52.8 billion for the last four quarters
 Market Position: #1 in U.S., #3 in Japan, #2 in Europe
 7 Manufacturing centres spanning the globe, located in United
States(3), Brazil, Europe (Ireland), Malaysia, and China.
 Nearly one out of every five standards-based computer system
sold in the world today is a Dell.

32. Dell Timeline
1984: Michael Dell founds Dell Computer Corporation
1987: International expansion begins with opening of subsidiary in United Kingdom
1988: Dell conducts initial public offering of company stock (3.5 million shares at
$8.5 each)
1993: Enters into Asia-Pacific region with subsidiaries in Australia and Japan
1996: Company begins major push into the server market
2000: Company sales via Internet reach $50 million per day
2001: For the first time, Dell ranks No. 1 in global market share
2004: Kevin Rollins becomes Dell's next chief executive officer. Michael Dell
moves to Chairman of the Board

33. Management
 Michael Dell – Chairman of the Board (founded company
in 1984)
 Kevin B Rollins – President and CEO since July 2004
(prior he was president and COO of Dell Americas – joined
in 1994)
 William J. Amelio – Sr. VP Asia-Pacific/Japan (since
2001)
 Paul D. Bell – Sr. VP Europe, Middle East & Africa (since
1996)
 Joseph A. Marengi, Sr. VP, Americas (since 1996, came
from Novell)
Many of Dell’s current management came to the company around 1996-97.
Based on biographical evidence, many were lured from other high-tech
companies, including Novell, HP, Apple, Sun and Texas Instruments.

34. Strategy
 Uses the direct business model (reliant on very efficient
manufacturing and supply chain management)
 Helps turnover inventory every four days (on average)
 Helps ensure the latest technology is offered without
keeping outdated products on the ‘shelves’.
 Provides customers with single point of accountability
 Standards-based (do not support proprietary technologies)
 Collaboration with strategic partners
 Positively affects both input prices and product leadership
 Adding a significant layer of innovation (value-added
processes)

35. Dell’s strategic corporate
initiatives for the future
 Continued Global Growth
 Growth outside of U.S. in largest countries at 30%
 Product Leadership
 Ex. integrated solutions to businesses (servers,
desktops, and now printing)
 Enhancing the Customer Experience
 Dell value-added services (anti-spyware and virus
software and support)
 Developing a Winning Culture:
 Essential for integrating Dell’s subsidiaries in over 47
countries

36. Company Structure

37. Sources of Revenue
 Dell designs, develops, manufactures, markets,
sells, and supports the follow products:
•Servers •Notebook Computers
•Storage •Desktop Computers
•Workstations •Printing and Imaging
•Networking •Software and
Peripherals
•Dell also offers a variety of services from development and
support to professional and fully managed solutions.
Dell also has a financial services division which is a joint venture between Dell
and CIT group. It organizes financing alternatives for clients

38. Sales Mix (by Region & Product line)
Product-specific

39. Revenue Growth

40. Revenue Growth
Net Revenue
Net Revenue (in
70000
Year Millions)
2001 $31,888
60000
2002 $31,168
Revenue (in Millions)
50000 2003 $35,404
2004 $41,444
40000
2005 $49,205
30000 2006 $55,000
2007 $60,000
20000
10000
0
2001 2002 2003 2004 2005 2006 2007
Fiscal Year

41. Costs
 Input costs from suppliers (COGS)
 Continuing drop in PC prices but what about Dell’s
gross margin?
 2001: 17.7%, 2002: 17.9% 2003: 18.2% 2004: 18.3%
2005: 18.6%
 Operating Expenses 
- marketing, sales and admin.
- R&D
 Almost zero long-term debt
 no service payments

42. Earnings Per Share
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
2001 2002 2003 2004 2005
Year
2006 FY Forecast: $1.59

43. Market Share by Region
Fiscal Year Ended
Annual Market
Share: 30-Jan-05 30-Jan-04 31-Jan-03 1-Feb-02
Americas 29.10% 27.70% 24.80% 20.30%
Europe 11.70% 10.50% 9.60% 9.00%
Asia Pacific-Japan 8.30% 7.20% 5.90% 5.00%
Worldwide 17.80% 16.70% 14.90% 12.70%

44. Key Financial Analysis Figures
 Number of Shares Outstanding
 2.4 billion
 Consistently been declining since 2001 (2.7B)
 Cash and Short-term Investments/Share
 As of Q2 2006: $3.77/share
 ROE: 2001: 39.78%, 2002: 24.36% , 2003: 44.32%,
2004: 47.53%, 2005: 47.62%
Ratios:
 Book value/share = $2.70, Price/Book = 11
 Price/Sales* = 1.4 P/E* = 21
*Calculated using P = $29

45. Financial Statements
 Balance Sheet
 Income Statement
 Cash flow Statement

46. Stock Options
As of Jan 28, 2005
As of Jan 31, 2003
 Average exercise price has steadily been increasing ($28.99 in 2005, compared
to $8.78 in 2001)

47. Options (cont.)
Impact to earnings using fair value

48. One Year Stock Price

49. 10 Year Trading History

50. Performance Comparison
2 Years
IXIC = NASDAQ
IXK = Nasdaq computers index

51. Model Valuation
 With the residual income model:
 Dell’s price should be between $15 and $25
depending on the assumptions used.
 SinceDell does not pay a dividend we cannot
use dividend models to calculate a price.
 The FCFE model also does not work very
well with the stocks that are in Dell’s industry
 Produces a price of $6 if the same k from the RI
model is used.

52. How does Dell Measure up?
Statistic Industry Average DELL
P/E Ratio (ttm) 28.6 21.14*
Price/Book 10.5 12.75
Net Profit Margin 6.7% 9.2%
Price to FCF 38.5 15*
Return on Equity (ttm) 37.0% 59.18%
Price to Sales 1.81 1.4*
*Lower is better
As of Nov 9, 2005

53. Value Drivers (cont.)
 Profits
 Company has turned a profit year after year.
 Continued expense reduction and increasing
margins will help contribute to higher profits.
 Especially as international centres recently expanded
into mature.
 Share buy back and continued reduction in
gratuitous option issuance to execs
 Has a growing and already significant international
presence  through diversifying it spreads risk of
national economic/demand slowdowns

54. Value Drivers (Cont.)
 Growth
 Market share available abroad in Asia-Pacific and Europe
 E-commerce forecasted to increase especially in Asia
 Outside of the US, growth was over 30%. Has been strong for
many years
 Product/service expansion
 Printing and Imaging revenues rose from 0 to 1.2B in 2005 in just
under 2 years!
 Positioning themselves strategically within the emerging digital TV
segment, making partnerships with Microsoft and Intel
 Technology Changes/PC Replacement
 Release of Windows Longhorn – may spur people to buy new
computers with 64-bit capabilities
 More than 35% of users plan to replace their computers in coming
years (long-term avg. 20%)

55. Factors to Consider
 Quarterly earning announcements
 Investors have historically reacted drastically when quarterly
numbers are released
 Seasonality and cycles associated with the PC market
(almost 60% of sales attributable to PCs)
 Foreign Exchange rate risks (38% of revenue from outside
U.S.)
 hedging and derivatives
 repatriation of profits (in Q4 2005 $4.1 billion)
 R&D investment is lower than competitors which might hurt
Dell in the long-run (especially in service sector)

56. Recommendation
 Analysts:Depression due to one quarter’s earnings forecast is a
• Recent Price
buying opportunity. Current Year Next Year
Earnings Est
Jan-06 Jan-07
•Attractive price vs. Competitors
Avg. Estimate 1.59 1.87
• The company of Analysts to make enormous amounts of money
No.
continues 33 32
• Limited-Downside potential for price (Share buyback)
Low Estimate 1.55 1.80
High Estimate 1.65 1.95
•Expansion efforts in Asia-Pacific and Europe continue to show value
Three Months
•Good management (experienced) have led Dell on a path of continued
Current Month Last Month Two Months Ago Ago
growth Buy
Strong 8 9 9 8
Buy 11 13 12 15
•Value Drivers (growth & profits) are strong
Hold 12 9 9 7
Sell 1 0 0 0
Strong Sell 0 0 0 0

57. Adam J Svoboda

58. Background
 Founded in 1939 by Bill Hewlett and Dave
Packard
 First Product: Audio Oscillator
 First Customer: Walt Disney
 Went Public on: Nov 6, 1957

59. Management/Executives
 Mark Hurd - 2005 - Chief Executive Officer and
President. President and CEO of NCR since 2003
(25 years of experience)
 Gilles Bouchard - Exec Vice President PSG (in Hp
since 1989)
 Vyomesh Joshi - Exec Vice President IPG since
1980
 Randall D. Mott - Exec Vice President since 2005,
with dell for 3 years
 IN GENERAL: MOSTLY NEW BUT EXPERIENCED

60. Board of Directors
 Lawrence T. Babbio, Jr. – 2002
 Patricia C. Dunn - 1998
 Richard A. Hackborn - 1992
 Mark V. Hurd - 2005
 Dr. George A. Keyworth II - 1986
 Tom Perkins - 2005
 Robert L. Ryan - 2004
 Lucille S. Salhany - 2002
 Robert P. Wayman - 2005

61. Current Events
 HP takeover of Compaq - $25bn
 New CEO – Mark Hurd
 2005 – Profits fall
 Compaq acquisition complete
 Several other acquisitions have taken place

62. Snapshot – Compaq
Merger
 May 7, 2002, largest merger computer industry
merger in history
 $25 billion
 1 Compaq share = 0.63 HP share
 Attempt to eliminate costs by reducing overlap
in sectors
 Was opposed by both Compaq and HP (family)

63. Corporate Objectives
 Customer loyalty
 Profit
 Market leadership
 Growth
 Employees
 Leaders
 Global citizenship

64. Products and Services
 Desktops and Workstations
 Notebooks and Tablet PCs
 Printers and multifunctional machines
 Handhelds and calculators
 Monitors and projectors
 Fax, Copiers and Scanners
 Digital Photography
 Storage
 Servers
 Networking
 Software

65. Market Position
 #1 globally in the inkjet, all-in-one and single-function printers,
mono and colour laser printers, large format printing, scanners,
print servers and ink and laser supplies*
 #1 globally in x86*, Windows®*, Linux®*, UNIX* and blade
servers
 #1 in total disk and storage systems
 #2 globally in notebook PCs
 #1 globally in Pocket PCs
 #1 in customer support
 #1 position in customer loyalty for ProLiant servers

66. HP Business Sectors
 (PSG) Personal Systems Group
 (IPG) Imaging and Printing Group
 (ESS) Enterprise Storage and Servers
 (HPFS) HP Financial Services
 (HPS) HP Services
 Software
 Corporate Investments

67. (PSG) Personal Systems
Group
 Commercial and consumer PC’s
 Workstations, handheld computer devices and digital
entertainment systems
 Calculators
 Software services for commercial and consumer
markets

68. (IPG) Imaging and Printing
Group
Printing, imaging and publishing
devices
Both for home users and
businesses

69. (ESS) Enterprise Storage
and Servers
 Storage and server products
 Low and high end scalable servers e.g.
Superdome
 Enterprise arrays, storage area networks

70. (HPFS) HP Financial
Services
 Leasing, financing, utility and asset recovery
services
 Specializedfinancial services for
small/medium businesses and educational
and governmental entities.

71. (HPS) HP Services
 Technology and consulting
 Integration services
 Managed services

72. Software
 Software solutions including support
 Infrastructure, operations and applications
management

73. Corporate Investments
 Labs and ‘business incubation’ projects.
 Revenue is from selling network infrastructure
products: enhancing computer and enterprise
solutions.

74. % Revenue byofSector
% Revenue
35
30
ESS
25
HPS
20
%
Software
15
10 PSG
5 IPG
0 HP Financial
2004 2003 2002 Corporate Investments
Year
2004 2003 2002
ESS 18.70 19.78 14.10
HPS 17.01 16.75 12.27
Software 1.14 1.05 0.95
PSG 30.39 28.75 19.90
IPG 29.87 30.59 27.60
HP Financial 2.34 2.60 2.31
Corporate Investments 0.55 0.47 0.39

75. % Profit by Sector
% of Profit
120
ESS
100
HPS
80
Software
60
%
PSG
40
IPG
20
HP Financial
0
Corporate Investments
-20 2004 2003 2002
Year
2004 2003 2002
ESS 3.27 2.93 -10.27
HPS 23.85 28.08 29.72
Software -2.74 -3.92 -11.61
PSG 3.97 0.45 -7.87
IPG 72.65 74.14 112.24
HP Financial 2.36 1.63 -4.47
Corporate Investments -3.36 3.32 -7.74

76. Earnings by Region
Revenue overview by region
(in billions, for fiscal year 2003)
Europe,
Middle East,
Africa United States
39% 40%
Americas
(excluding
U.S.)
6%
Japan Asia Pacific
4% 11%

77. Revenue by Region

78. Analysis in
% increase/decrease 9 months of 2004 - 2005
Net Revenue 9.000957003
Net Expenses 8.931591637
Earnings from Operations 10.31313819
Net Earnings -17.62261014
% increase/decrease in 2003-2004 2002-2003
Revenue 9.37 29.11
Costs 7.86 21.81
Earnings on Operations 45.96 386.17
Net Earnings 37.73 381.17

79. Shares
000’ 2004 2003 2002 2001
Balance 2,910,760 3,042,761 3,043,733 1,938,828
Issuance 111463
Repurchases 172468 39780 39623
Current – 2,907,000,000
Further $4bn buyback approved

80. Financials
 Dividend - $0.08 per quarter
 No stock splits since Dec 2000 (2 for 1)
 Year Est. EPS (10/05) 1.56
 Price/Earnings (Trailing)18.695
 Earnings Growth Rate17.200
 Relative P/E1.053
 Estimated P/E18.300

81. The stock as of 10 Nov
2005
52 Wk High 29.51
Last 28.23 USD Date 20/09/2005
Change -0.31 52 Wk Low 18.85
% Change (1) -1.09% Date 11/11/2004
High 28.63 Dividend 0.08
Open 28.4 Div Date 12/09/2005
Low 28.21 Market Cap 80,879 M
Net Volume 7,242,200 P/E Ratio 26.89
EPS 1.05

89. Revenue and EPS (2004)

90. Return on Investment

91. Stock Performance

93. Sector Comparison

94. Factors affecting future
performance
 Competition
 Inventory management
 ‘Staying on top of technological development’
 Intellectual property rights
 Economic uncertainty
 Terrorism
 Political changes
 ‘business disruptions’

95. Inventory and Distribution
 Big Box
 BTO and CTO combined
 High end and low end sales

96. Competitors by Sector
 PSG – Dell, IBM. Acer and Fujitsu (Europe)
 IPG – Very pricing competitive. Xerox, Epson,
Lexmark
 ESS – Rapid technological innovation. IBM,
EMC, Sun Micro
 HPS – IBM, EDS. Competitive in support and
Consulting.
 Software – BMC, Veritas, Mercury, IBM
 HPFS – Financing companies: IBM Global
Financing, Banks and Financial Institutions

97. Moving Forward?
 R&D – Constant at $3,500million
 Revenue increasing BUT so are costs
 Profits are sensitive to US$ exchange rate
 Several Business acquisitions
 $5billion authorized for share repurchases ($3b
remaining)
 Innovative and popular products
 Predicted fourth Q $22.2-$22.4bn Revenue – Up
10%

98. Acquisitions
 Snapfish – Online photo service
 Scitex Vision – Super-wide digital printing
 RLX Technologies – Software provider
 Peregrine Systems – Management software
 Compaq – PC supplier
 ApplQ – open storage area network managemen

99. Market Leaders
 The largest consumer IT company
 The world's largest SMB IT company
 A leading enterprise IT company
 Alsohas a significant presence in the public sector
as well as health and education

100. Philip Fisher
 Production, Marketing, Research and Financial skills
Good
 The People Factor
New and old leaders - experienced
 Investment characteristics
Very diversified and continually evolving
 Price of the investment
Medium

101. Conclusion and
Recommendation
 2005 is a disappointing year
 New acquisitions bring a positive light
 Share buy-back
WEAK BUY (wait till
final results and evaluate!)

102. Gateway Inc.
Technology You Trust

103. Values
Caring, honesty, teamwork, respect,
aggressiveness, efficiency, fun and common
sense.
--- Offering products directly to customers,
providing them with the best value for their
money and unparalleled service and support

104. Company Background
 Founded in 1985 in a farmhouse by Ted Waitt
 Went public in 1993 traded on NASDAQ
 Started trading on NY Stock Ex in 1997
 3rd largest PC maker in U.S.
 In March 2004, acquired eMachines ($235 million)
 Currently 1,900 employees
 6% of US market share in consumer segment

105. Distribution Channels
 Direct distribution: web, phone, retail stores
 Indirect distribution: retailers like Costco
 Limited resellers in Canada and Mexico

106. Products
 Computers
desktops, notebooks, all-in-ones, professional PC
Systems (networking, servers and storage)
 Computer accessories
Mouse, storage, memories, monitors, modems
 Consumer electronics
digital TVs, digital camera, MP3 players, DVD
players
 Software

107. Competitive Strategies in the 90’s
Gateway’ big box strategy and JIT
Direct +retail
Competitors:
Dell’s build-to-order, direct only, JIT
Compaq’s Build-to-forecast, retail only

108. Acquired ALR
Acquired Advanced Logic Research (ALR) in
1997 and announced its entry into corporate
network server market
Channeled through own retailing stores

109. Strategies in the 21st
Century
• Encountered big loss from 2001
failure of cost leadership strategy
higher cost and lower margin
slow inventory turnover
• “Branded integrator”
offered the fullest range of product and
service
• B2B 2003

110. Acquiring eMachines
 Acquired eMachines in March
2004
 50 million new Gateway shares
and $30 million cash

111. eMachines
Philosophy
 Build affordable computers for everyone – no
compromise PCs that deliver incredible value and
performance.
Market
 budget-conscious consumers
Products
 PCs and peripheral displays
Distribution Channels
 3rd party retailers: BestBuy, Office Depot

112. eMachines
 2cnd largest vendor of desktop through US
retailers
 low-cost, full-featured computer systems
 $1.1 billions of sales in 2003
 International market in Japan and UK
 Wayne Inouye, who joined eMachines in
2001 and quickly turned it into money-
making business

113. What does eMashine bring to GTW
 Low cost distribution model and retail
relationaship
 Highly efficient and profitable operation
model
 Market shares in consumer desktop sector
 International growth opportunities
 Management team

114. After Acquisition
 eMachines CEO Wayne Inouye was named CEO of
Gateway, succeeding Ted Waitt, who remains
chairman and the company's largest stockholder
28.3% shares and plays an active role in long-term
strategic direction, product development and
marketing plans.
 Combined management team from both Gateway
and eMachine
 A few new members joined management team

115. Management
Wayne R. Inouye (eMachine) CEO and
President
Former president & CEO of eMachine since 2001
Senior vice president of PC merchandising for
BestBuy
Scott Bauhofer, Senior vice president
Former senior vice president of BestBuy
bachelor's in history from San Francisco State
University

116. Management

Bob Davidson (eMachine) Senior vice president
U.S. retail
Executive of eMachine P&C development
Former vice president of BestBuy
Ed Fisher (eMashine)Senior vice president
international
Executive of eMachine,former Intel sales director
MBA Northwestern University's Kellogg Graduate
School of Management

117. Management
 John Goldsberry, (eMachine)senior vice president, CFO
Joined Gateway in 2004
Former CFO of eMachine, leaded the negotiation with
Gateway
bachelor's degree in Applied Mathematics and a Ph.D. in
Business Economics from Harvard University
Greg Memo ,(eMachine) Senior Vice President, Products,
Marketing &Web
Former president at Compaq
MBA degree from San Jose State University and a
bachelor's degree in industrial engineering from Arizona
State University.

118. Management
Bruce K. Riggs, Senior Vice President, Operations and
Customer care
Former senior vice president of Quanta Computer Inc and Dell
bachelor's degree in Economics and Spanish at Lawrence
University MBA from from Indiana University
Bruce W. Smith, senior vice president, professional line
Former senior vice president of Equant, a global
telecommunications-services
master's degree in history from the University of Virginia
bachelor's degree in history from The Johns Hopkins University

119. Management
Dan Stevenson, Vice President, Direct
Joined Gateway in 2004
Former senior director at Apple Computer
MBA from Harvard University and a bachelor's in accounting
from Purdue University
Mike Zimmerman,(eMachine) Senior Vice President, Customer
Care Services & Quality Assurance
Former vice president and corporate planning at BestBuy
Bachelor's degree in business administration and marketing from
Northwood University.

120. Corporate Goals
 Profitably grow PC business
 Diversify revenue
 Increase gross margin with consumer
electronics products
 Reduce cost structure

121. Modified Strategies
 Multi-branding
 Keep eMachine’s original marketing strategy
 Closed 188 Gateway owned retail stores
 Channel through big retailers
 New manufacturing model
 International markets (Japan, Mexico)
 Consolidated supply base
 Decrease employees from 7400-1900

122. Go-to-market strategy

123. Distribution Channels
 eMachines brand sold worldwide by retailers
 Gateway products directly sold online and by
phone
 Gateway products sold in Canada, U.S.,
Mexico, and Japan by retailers
 Professional line (PCs, servers, service) sold
directly to organizations by sales force

124. Breakdown of Sales
BreakDown of Sales
90,000
80,000
70,000
60,000
Sales
50,000 2005
40,000 2004
30,000
20,000
10,000
0
Direct Professional Retail
Distribution

125. Net Income
Net Income
600
400
200
Net Income
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
-200
Series1
-400
-600
-800
-1000
-1200
Year

126. Earning Per Share
EPS
2
1
0
EPS
98
99
02
03
05
97
00
01
04
-1 Series1
19
19
19
20
20
20
20
20
20
-2
-3
-4
Year

127. Price to Book Value
Price to Book Value
7
6
5
4
P/B
Series1
3
2
1
0
1999 2000 2001 2002 2003 2004 2005
Year

128. Price/Earnings
P/E Ratio
60
50
40
P/E Ratio
30
Series1
20
10
0
-10 1999 2000 2001 2002 2003 2004 2005
Year

129. Return on Equity
ROE
6
5
4
3
ROE
2
Series1
1
0
-1 1999 2000 2001 2002 2003 2004 2005
-2
-3
Year

130. Current Price
Last: US$ 3.150 Net Change: US$ 0.000 % Change: 0.00%
Open 3.150 Bid
High 3.190 Ask
Low 3.130 EPS 0.20
Volume 2,314,700 E/P 15.7
52-week H 6.920 Indicated 0
annual div
52-week L 2.350 Yield 0

131. Current Ratios
 P/E Ratio9.26
 Beta Coefficient1.87
 Earnings per Share0.34
 Market Cap (billion)1.17 B
 Shares Outstanding371,165,000

132. Ratios
EPS Analysis 2003 2004 2005
Q1 -0.62 -0.51 -0.01
Q2 -0.22 -0.91 0.05
Q3 -0.43 -0.16 0.04
Q4 -0.35 -0.02 0.05
Year -1.62 -1.60 0.13
Return on Equity This Company Ind. Average S&P 500
Q2:2005 -21.04 26.68 14.07
Q2:2004 -125.78 21.92 13.78
Q2:2003 -33.70 18.71 9.00
Consensus EPS Estimate*
Q3 FY05 2005(E) 2006(E)
0.04 0.13 0.20

133. Financial Statement
 Income statement
 Balance sheet
 Cash flow statement

134. One-Year Price Chart

135. Against Market
Standard and Poor's 500 Computer Hardware Index

136. Five Year Performance

137. Share Repurchase
 Repurchase of Preferred Stock and
Convertible Note 2004 from America Online,
 Series A and C Preferred Stock with a par
value of $400 million plus 2.7 million
common shares, for $315.6 million in cash
and credits.

138. Value Driver
 Profitable eMachine brand sector
 eMashine’s profitable operating model
 International market
Underminded by
 Failure of integration of the two companies
 Competition in international market

139. Forecasting
 Opportunity to grow in international markets
 Maintain relationship with the big buyers
 Let us entertain you” is the new mantra of
computer industry. Previously, companies
focused solely on creating technology
 Competition:
Dell, Apple, HP

140. Competitive Landscape

141. Current Events
 Closed three federal deals valued more than
$20 million
 $1.7 million deal with California Highway
Patrol (CHP)
 Hyper-threaded dual-core added
 Enters strategic alliance with LEAF Financial
and Merrill Lynch

142. Philip Fisher Approach
 Production,Marketing, Research and Financial skills
Weak
 The People Factor
Haven’t been with GTW for a long time
 Investment characteristics
Somewhat diversified
 Price of the investment
Low

143. Conclusion
Weak Hold