Gateway closes 188 outlets across U.S.
By Elliot Spagat
Associated Press
SAN DIEGO — Gadget lovers trickled into Gateway Inc. stores for the last time yesterday, picking over nearly depleted stock on the final day of business for the computer maker's 188 U.S. stores.
About 2,500 employees — nearly 40 percent of the company's work force — are losing their jobs because of the store closures.
A glum-faced employee at a San Diego store rolled out an office chair to her car, but declined to comment. Former sales clerk Michael Driscoll walked out in search of new work.
"I need to find a job. I have a family. I need to pay bills," the 36-year-old said.
Gateway's U.S. stores accounted for about one-third of the company's revenue of $3.4 billion last year, according to analyst estimates, but Wayne Inouye, Gateway's new chief executive officer, said they were too costly to keep open.
Gateway has posted losses in 12 of the last 13 quarters, and some analysts say the company faces a difficult future. Charlie Wolf of Needham & Co. in New York said that success at Gateway hinges on the willingness of competitors to avoid a PC price war.
The Gateway stores — many of them furnished with barn silos and cow-spotted boxes — were a big hit after the first one opened in 1996 in Matthews, N.C., outside Charlotte. But customers dwindled as the Gateway brand began losing luster against Dell Inc. and Hewlett-Packard Co.
The chain peaked at 330 stores in the United States and Canada in 2000 — plus another 100 in Europe and Asia — before Gateway began a series of job cuts that shrunk its payroll from nearly 25,000 to about 6,500 today. The store closures will bring Gateway's employee count to 4,000.
The shrunken chain got a $20 million facelift last year, after Gateway introduced a hot-selling, 42-inch plasma television for under $3,000.
At the time, Gateway executives touted the stores as a key advantage against Dell, H-P and other PC companies that also were moving into consumer electronics. Unlike PCs, they said, consumers want to see that plasma TV and touch that digital camera before digging for their wallets.
Earlier this year, Gateway acquired eMachines, a provider of low-end PCs, for $290 million and Inouye, eMachine's CEO, took the top job at Gateway.
Inouye, who declined interview requests, told employees this week he is negotiating with big retailers to get Gateway wares into their stores by summer. While there are a few products available now in Costco and Office Depot stores, until a larger deal is reached, Gateway products mostly will be sold over the phone and on the Internet.
Investors have generally applauded the store closures. The company's shares have risen about 15 percent since the company disclosed the move. Shares on the New York Stock Exchange closed Thursday at $6.36, up 11 cents from a day earlier. The market was closed yesterday.
Some consumers were less enthusiastic yesterday.
Lori O'Brien, who owns two Gateway computers, was shopping for a power adapter cord at the Gateway store in Cary, N.C.
"I liked having the store so close and being so accessible," she said. "It was nice to have a face to see."
Another shopper, Jim Davidson, said he wasn't surprised, considering that a Best Buy is less than a mile away.
"I think it is too hard to compete," Davidson said as he browsed for clearance items.
