Gateway Touts Low-Cost Mantra at Meeting

Friday, May 21st 2004, 10:04 am

By: News On 6

IRVINE, Calif. (AP) _ Wayne Inouye, Gateway's new chief executive, on Thursday dismissed skeptics who say the personal computer and electronics company has shrunk to the point of irrelevancy.

``I hope they just keep saying that,'' he told reporters Thursday after his first annual shareholder meeting on the new job. ``I like to be ignored for as long as possible.''

Inouye, 51, joined eMachines Inc. in 2001, a then-struggling PC company that he led to nine straight quarters of profits by selling inexpensive desktops at Best Buy Co. and other big retailers. Last year, eMachines surpassed Gateway as the fourth-largest PC seller in the United States, though it is still far behind Dell Inc. and Hewlett-Packard Co.

When Gateway bought eMachines in March, Inouye became chief executive, replacing founder Ted Waitt, who remains chairman. Inouye stacked his management team with holdovers from eMachines, prompting the departures of several key Gateway executives.

Gateway, which has posted losses in 13 of the last 14 quarters, used the shareholder meeting to once again embrace the low-cost mantra that turned around eMachines.

``The low-cost producer will win in almost any business in this country,'' chief financial officer Rod Sherwood told a subdued crowd of fewer than 100 people.

In less than three months, Gateway has closed its 188 stores and said it will cut the work force to 2,000 employees by the end of this year, down from 7,400 at the end of last year and 24,600 at the end of 2000. It said it would stop manufacturing its own computer lines, relying entirely on outside suppliers.

Inouye told reporters he would like to make Gateway as lean as eMachines, which reported $1.1 billion in revenue last year with about 140 employees. But he said such a low-cost operation didn't gibe with Gateway's focus on corporate, education and government customers, which requires more employees on the phones and in the streets. eMachines targets consumers only.

Gateway plans to overhaul its product line in August, focusing on the hottest-selling models, some built-to-order work and video gaming. Gateway's desktop PCs will start at around $700, while eMachines' desktops will sell for less. Some products will be discontinued.

Gateway also expects to reach agreements to sell its products at major retailers in time for the back-to-school shopping season, Inouye said, declining to be more specific. He hopes to expand Gateway's presence to Germany and France.