TMO Reports - Gateway Shutters All Retail Stores; Cut 2,500 Jobs

by , 9:00 AM EST, April 2nd, 2004

Gateway, Inc. announced Thursday that after eight years, it will close all of its remaining 188 retail stores and lay off 2,500 employees on April 9.

"As we looked at all aspects of our business, we looked at our stores and decided this was our best move," said David Hallisey, a Gateway spokesman. He said the company plans to pursue wider retail distribution of its products in the US and abroad.

Hallisey said the Gateway stores will all close on the same day, but that it was still unclear how the company would deal with its stores' inventory.

The company said it will continue its direct-sales strategy to consumers and businesses via its Web site and phone orders. Gateway will provide more details about the impact of the closings on its revenue and costs as well as details on its future business strategy when it announces its first-quarter results April 29.

The store closings were not unexpected. Gateway has been struggling as of late to counter stiff competition from the likes of HP and Dell Inc. The company acquired eMachines in January and many industry analyst say that ever since then, Gateway's retail strategy in getting major retailers like Best Buy to handle its products has been hurt.

With the retail stores now out of the way, analysts believe Gateway can now form more perfect unions with retailers to handle all of their products, including its flat-screen televisions and digital cameras.

"This was a good move," said Tim Bajarin, president of research firm Creative Strategies. "They have been looking closely at the overall strategy as of late. They have to figure out who they really are and who their friends are in the different electronic spaces."

"Gateway is going to come out of this situation even better I think," Steve Baker, an analyst at NPD Techworld, told The Mac Observer. "I think Best Buy, Circuit City and CompUSA are all now potential homes for Gateway and eMachine products."

Gateway's revenue fell 20 percent last year, to US$3.4 billion, even though the company introduced dozens of PC and consumer-electronics products.

Gateway was founded in 1985 in an Iowa farmhouse. The company is known for its distinctive cow-spotted boxes, a tribute to its farm heritage. With its buying of eMachines, it now is the fourth largest maker of personal computers, ahead of IBM.

Gateway