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RealTime IT News

Gateway Beats Street - Trims Fat

Computer maker Gateway Thursday announced a restructuring that will reduce its workforce by 16 percent and close 19 of its 296 Gateway Country retail stores.

The Poway, Calif.-based company says it will cut 2,250 jobs from its current headcount of 14,000.

The job cuts are in addition to the 25 percent staff reduction that the company announced last year.

"We believe that there are no other restructuring activities on the horizon for 2002,'' says Gateway CFO Joe Burke.

The company made the cuts after notifying employees and reporting its 4th quarter and year-end earnings.

The No. 4 computer maker posted $5.1 million or 2 cents per diluted share before one-time items, compared with a loss of $128 million or 40 cents per share in the year-ago quarter.

Analysts polled at Thomson Financial/First Call anticipated that Gateway would earn 1 cent a share for the quarter with revenue at $1.28 billion.

"We said we'd return to profitability in the fourth quarter and we did," says Gateway chairman, president, CEO and co-founder Ted Waitt. "We made dramatic improvements against our key priorities for the year, controlled every lever of the business to deliver on that goal and managed our cost structure to the lowest absolute level it's been in years."

But Gateway says its profit was not completely what it had expected. The company reported $1.1 billion in sales, which is down from $2.4 billion a year ago.

The Gateway Country stores were the highlight of Waitt's return to the company. But analysts say the PC-maker's slumping sales and reduced market share are hardly worth the $200 million the company spends on the stores.

The boutique stores have not taken off as expected. In 2001, Gateway closed 27 U.S. and 11 Canadian stores. The company also abandoned plans to add 90 new stores and withdrew its planned stores in Asia and Europe.

New initiatives like its Preferred Family Package and home installation service , designed to make customers dependent on the Gateway Country stores, have also proved fruitless.

Gateway currently supports six divisions: hardware, finance, training, applications, support services and communications