Gateway to Cut 1,900 Jobs, Close 80 Stores
Computer manufacturer Gateway Inc. said Monday that it would eliminate 1,900 jobs and close 80 retail stores by the end of this month in its latest effort to stem red ink.
The cuts represent about 17% of Gateway’s workforce and 28% of its stores around the country. When the layoffs are complete, the Poway, Calif.-based company will have 9,300 employees.
Company spokesman Robert Sherbin wouldn’t say how many of the job losses would be in California, where Gateway has fewer than 1,000 people on its payroll.
He said the cuts would be divided between retail and non-retail positions.
“We’re taking the tough but necessary steps to continue our transformation and get back to healthy growth,” Gateway Chief Executive Ted Waitt said in a statement. “We have the right team and the right level of urgency to get it done fast.”
The company lost $309 million last year on sales of $4.2 billion.
This month, Chief Financial Officer Rod Sherwood said the company would cut costs by $400 million this year and take an $80-million restructuring charge this quarter, which ends March 31.
Gateway shares rose 20 cents to $2.40 on Monday before trading was halted on the New York Stock Exchange.
Waitt has been restructuring Gateway since 2001, when he returned to the CEO suite of the company he founded in an Iowa farmhouse in 1985.
He quickly cut Gateway’s workforce by 10%, shut its Internet service, moved the company’s headquarters from North Sioux City, S.D., to Southern California and began closing more than 50 of its stores, which once numbered as many as 326.
Gateway also has revamped its stores, which were once mere showrooms without inventory. Now Gateway outlets stock the company’s bestselling computers and laptops, along with a growing number of add-on devices such as digital cameras, music players and televisions.
“Gateway’s challenge is to better establish its brand values relative to its competition and to understand how to make more effective use of its remaining stores,” said Charles Smulders, an analyst at Gartner Dataquest.
“In the low-margin PC business, those stores must show a significant return on investment,” he said.
“Clearly, Gateway is pruning back the lower-performance ones.”
Six stores in California will be shuttered -- in Encinitas, Fresno, Temecula, Oxnard, Goleta and Fairfield. Ultimately, Gateway will have 192 outlets in 46 states.
Gateway said it would save more than $200 million this year as a result of the restructuring moves announced Monday. The company said it would shed another $200 million by reducing component and warranty costs, increasing efficiency in its supply chain and boosting manufacturing productivity.
“Any player that’s going to survive at this point has to be leaner,” said Tim Bajarin, president of Creative Strategies, a technology consulting firm.
Gateway also will have to become “smarter in marketing,” Bajarin said, especially because the No. 4 computer maker doesn’t enjoy “anywhere near the kind of marketing budgets that Dell or Hewlett-Packard have.”
Dell Computer Corp. and Hewlett-Packard Co. are the world’s two largest manufacturers of personal computers.
But Bajarin said all PC makers should get a boost this year as corporations begin replacing their aging PCs.
Also Monday, Applied Materials Inc., the world’s largest manufacturer of equipment to make semiconductors, said it is eliminating 2,000 jobs.
The Santa Clara, Calif., firm said it would lay off 1,400 employees in North America and 600 elsewhere, and close several facilities around the world.
Applied Materials has gone through several rounds of job cuts as the chip industry weathers the worst slump in its history.
Its shares rose 80 cents to $13.13 in regular Nasdaq trading Monday but dipped to $13.03 in after-hours trading after the announcement of the cuts.
Associated Press was used in compiling this report.
