Gateway planning to fire 1,900 workers

By William Selway
Bloomberg News Service

POWAY, Calif. — Gateway Inc., the personal-computer maker whose shares have dropped 97 percent from their 1999 peak, will fire 1,900 workers and close 80 retail stores to cut costs after a two-year slump in demand for PCs.

The reductions, about 17 percent of its staff, will help lower its expenses by $200 million a year, the PC maker said in a statement.

It plans to save an additional $200 million by boosting productivity and trimming component costs.

Gateway has had $1.33 billion in losses in the past two years as businesses and consumers bought fewer PCs. The Poway, Calif.-based company wants to shore up its PC business and add more-profitable electronics, such as a flat-screen television introduced last year, to lessen its reliance on computers. Gateway plans to unveil digital displays and audio and video gear in 2003.

"It's a difficult PC market as everyone knows," Chairman and Chief Executive Ted Waitt said on a conference call. "We're looking to leverage the Gateway brand wherever we can."

Gateway expects sales to drop to $820 million to $850 million in the first quarter from $992.2 million a year earlier, with a loss of 62 cents to 66 cents a share, including restructuring costs. It was expected to have a loss of 34 cents a share, the average estimate of analysts surveyed by Thomson Financial.

Gateway's sales last year were less than half the $9.6 billion it reported for 2000. Sales have dropped as consumers buy fewer new personal computers and larger rivals such as Dell Computer Corp. cut prices.