RealTime IT News

Gateway Starts Putting Plants Out to Pasture

Gateway Wednesday continued to shift its core business model from a pure PC-maker to a "branded integrator."

The Poway, Calif.-based computer maker said it is eliminating 450 jobs (about 5 percent of its workforce) and closing its Hampton, Virginia manufacturing complex on Sept. 30. While Gateway said it will continue to maintain a presence in North Sioux City, South Dakota, it plans on reducing staffing numbers at that location and at its Sioux Falls, South Dakota facility as certain responsibilities shift to partners and other facilities.

The changes are part of the company's metamorphosis plans, which it revealed on May 8 during an analyst meeting. The plan is to establish regional hubs for service and shipping purposes using strategic partners and collaborative planning with suppliers, as well as consolidating in-house resources. Gateway says the changes should be finalized by mid-November, in time for the holiday selling season.

The company says the consolidation and hubs should "facilitate improved flexibility and faster delivery times" and improve its traditional build-to-order and configure-to-order PC systems.

"We have spent the past six months transforming our products, our retail network and our marketing efforts," Gateway chairman and CEO Ted Waitt said in a statement. "But we're also completely re-designing our sourcing, logistics, service and support systems to create a more efficient infrastructure as the backbone of the new Gateway."

The company has said it would roll out 15 new consumer electronics products, four new mobile products, three new systems and networking products (including a four-way server and an external storage device), as well as about 28 new software peripherals and accessories. Specifically, new offerings will include personal digital assistants, digital televisions, rear-projection TVs and a DVD player that can connect to a home network. Most recently, the company began offering digital cameras.

On the financial side, Gateway said the changes would save it between $115 million and $130 million a year more than the $400 million it has already cut from its annual budget. The company expects to book related transformation expenses of $120 million to $160 million, a portion of which will be recognized this quarter with the balance recognized primarily in the fourth quarter of 2003 and the first quarter of 2004.