GATEWAY TO OFFER NEW PRODUCTS.

Byline: Brent Hopkins Staff Writer

Gateway Country is putting some new toys in its barns as the computer maker redesigns its retail strategy.

The boutique offshoots of the Poway-based computer manufacturer will soon boast consumer electronics alongside its traditional computer and monitor lineup. More digital cameras, digital video cameras and MP3 players will make their way into stores throughout the year, an attempt for Gateway - with stores in Glendale, Woodland Hills and Oxnard - to stem the drastic reduction in its retail business. The company has already said it expects to lose upward of $200 million for the year, and its market share for PC sales has plummeted.

The shops, which number 277 nationwide, could use a tuneup, according to Charles Wolf, a securities analyst who follows the stock for New York-based investment bank Needham & Co. Inc. Since PCs are currently sold at such cut-rate prices, Wolf said a variety of process should improve profits.

``The stores are underutilized,'' he said. ``They could be selling a much richer mix of products than they currently sell. The margins on these things are higher than PCs, because what they're doing is pricing themselves at a very low margin. That gets people into the store, then they get them for the higher margin products.''

The redesigned product offering, intended to showcase the PC's full range, could provide much stronger sales potential in coming years.

``The PC market's tough, but our consumer buyers are using them for things more than ever before,'' said Brad Williams, Gateway's director of communications. ``Digital cameras, digital video and MP3 players should grow up to 12 percent in the next few years, while PCs are only growing around 4 percent.''

Branching out into unfamiliar ground could prove dicey, Wolf said, but at this point, it's a chance Gateway needs to take.

``It creates something of an investment risk, but it's manageable,'' he said. ``They're not healthy, so this is certainly better than what they've been doing.''

Analysts cautioned the firm against straying too far from its roots, however. Though the PC wars are hard fought, the consumer electronics business, with dominant players like Best Buy and Circuit City, remains even more competitive segment. Peter Labe, a senior technology analyst for the Fairfield, Conn. research firm Nutmeg Securities, said an attempt to go head to head with larger chains could prove damaging.

``I don't think you can wander very far off,'' Labe said. ``If you want to become an electronics store like Best Buy, that would be crazy. There are related things you could sell, though, like DVD players. Those are already in most computers, so they could sell standalone ones, as well. I don't think you'll ever think, oh, I need a VCR, I'd better go to the neighborhood Gateway.''

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(color) Gateway employees Mike Sanfelippo, left, and Archi Prudencio display a laptop and MP3 player the store is now selling.

Gene Blevins/Special to the Daily News