GATEWAY Corp. plans to lay off 4,700 employees, one-quarter of global work force
Wednesday, August 29th 2001, 12:00 am
By: News On 6
SAN DIEGO (AP) _ Gateway Corp. has pulled the plug on operations in Asia and slashed a quarter of its worldwide work force as part of a new strategy that moves the computer retailer further from its roots as a maker of low-cost personal computers.
Gateway's chairman and chief executive, Ted Waitt, said Tuesday the layoffs of 4,700 employees were part of a restructuring that would take the company ``beyond the box.''
Sales of the ``box,'' or the personal computer, fell worldwide for the first time this year since Waitt started making affordable computers in an Iowa farmhouse 16 years ago. Analysts say consumers don't see a reason to make the upgrades in the new millennium that kept shipments in double-digit growth year after year.
Gateway, the No. 4 computer maker, has been hit especially hard, due, in part, to its focus on the shrinking U.S. industry. The company lost more than $500 million the first six months of the year and has seen its stock price slump nearly 88 percent off its 52-week high. Shares closed Tuesday at $8.60.
Outlining his plan Tuesday for the ``transformation of Gateway,'' Waitt said the company would move aggressively to tap high-margin, high-growth U.S. technology markets in five new areas: networking, software applications, training, financing and support services.
``We're going after a much bigger pie than we've talked about before,'' Waitt said.
Gateway lacks the distribution, brand awareness and local presence to do well overseas, Waitt said, adding, ``We don't have to be a global business to succeed.''
Analysts, however, were cool to Gateway's new plans.
``In a sense, they are changing the company charter,'' said Eric Rothdeutsch, a computer industry analyst for Robertson Stephens in San Francisco. ``I think the jury is going to be out for quite a while until they start to show some results.''
The company, with 19,000 employees worldwide, said it will immediately close all of its company-owned operations in Malaysia, Singapore, Japan, Australia and New Zealand. Plans are underway to exit key markets in Europe. About 2,500 jobs will be cut overseas.
The rest of the layoffs will target the company's 16,500 U.S. work force. Gateway is closing customer service and sales centers in Hampton, Va.; Vermillion, S.D.; Salt Lake City; and Lake Forest. An assembly plant in Salt Lake City also will be shuttered.
Gateway says the layoffs will save the company about $300 million a year, although the computer maker said it will take a one-time charge of $475 million because restructuring and layoffs. Waitt said Gateway expects to become profitable in the fourth quarter of 2001 and the company will have $1 billion in cash on hand by year's end.
The layoffs follow an earlier wave of 3,000 job cuts and a management shake-up which saw Waitt return from semiretirement. In his absence, Gateway's costs ballooned after it opened 100 new Gateway Country stores, expanded internationally and burned through cash.
Waitt imposed a series of cost-cutting measures. The company closed 27, or about 10 percent, of its retail outlets with their trademark cow hide spots. To save $140 million over 10 years _ and return to a more folksy environment _ the company will soon leave San Diego for an 80,000-square foot warehouse in Poway, a suburb 15 miles away.
``We're planning to win by building a lean, nimble organization that is unified and focused on our customer base unlike any other time in our history,'' Waitt said.