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August 16, 2004 Stock Pick: Genitope Corporation (GTW)

Stock Price: $3.78

Gateway, Inc. is a manufacturer of the branded computers Gateway and eMachines. The company is currently the third largest PC company in the United States. Distribution channels include major retailers, web and phone, and direct sales.

Last spring, Gateway elected a new CEO and President, Wayne Inouye. He has since expressed his plan to return the company to profitability. Part of his plan is to enact aggressive cost cutting including closing down all Gateway stores and laying off workers until they reach their target of 2,000 employees.

Gateway and Dell have moved in opposite directions since 2000. They were both ranked about the same in quality at the time, but as we see now, Dell did a much better job at branding and distribution. Top management at Gateway is now mostly composed of members from the eMachines team.

The current CEO of Gateway was a former top executive at Best Buy. The company recently formed a distribution agreement with Canada Best Buy stores, and we expect an agreement to come soon in the United States.

At this point, GTW is close to its year low with an objective of profitability in 2005. This makes us believe there is little downside risk.

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