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RealTime IT News

Gateway Streamlines, Dismisses 25 Percent Of Staff

Angling to return to profitability by the fourth quarter of 2001, Gateway Inc. Tuesday unveiled the second major plot points in its story to shift focus from being a computer manufacturer to becoming a "personalized solution provider" when it said it will restructure considerably, including a global 25-percent workforce trim.

The San Diego-based firm said it will take a third-quarter charge of $475 million, and hopes to save $300 million with its repositioning. Gateway, which hopes to make better use of its retail footprint, said it would formally reorganize into six lines of business. The computer maker last month forged a U.S. Markets division and Solutions group, and will now manage its operations along the following lines (including its core hardware unit): communications, applications, learning, financing and services. Gateway will begin reporting revenue and gross profit for each of these lines of business starting in the fourth quarter. The company has yet to provide the public with details about what these new business lines will offer.

With an escape from its stagnant European market business a distinct possibility, the firm said it plans to focus on target customer segments (hence, the more specialized divisions) through a 296-store retail exposure attack, which it hopes will spread its brand on a massive scale.

As part of this strategy, Gateway will shutter operations in Malaysia, Singapore, Japan, Australia and New Zealand; a definitive report regarding its European operations is expected within the next 30 days.

The firm, who said it will cut its U.S. and worldwide workforces 15 and 25 percent, respectively, also plans to close call centers in Hampton, Virginia; Vermillion, South Dakota; Salt Lake City, Utah; and Lake Forest, California. To reflect a more streamlined call center reach, centers will remain in Sioux Falls and North Sioux City, South Dakota; Kansas City, Missouri; Rio Rancho, New Mexico; and Colorado Springs, Colorado.

The aforementioned charge of $475 million is comprised of cash and non-cash charges of $150 million and $325 million, respectively; Gateway projects it will exit the year at approximately its current level of cash and marketable securities of $1 billion.

Gateway Chairman and Chief Executive Officer Ted Waitt remained positive despite the heavy restructuring: "As tough as these decisions were to make, we're doing all the right things to create a new company with a unique competitive edge and a healthy, profitable future. "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. We intend to succeed market by market, customer by customer, as the only company that can deliver personalized technology solutions on a local basis."

Gateway's move, as bold as it is, is in great part predicated on the sluggish PC sector, which is hurting the No. 4 computer maker as much as it is rivals Dell and Compaq. Analysts have said that despite the "back-to-school" season many consumers are not snatching up new PCs because they have little new to offer in terms of applications. And Microsoft's XP operating system, with all of its enhanced capabilities and pomp, isn't due until October 25.



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