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Gateway Taking Steps to Cut Costs

The PC maker will hire executives to trim expenses after posting losses in seven of the last eight quarters.

January 07, 2003|From Bloomberg News

POWAY, Calif. — Gateway Inc. on Monday said it will hire more executives and may close stores as it tries to return to profitability after losses in seven of the last eight quarters.

Gateway is adding executives to help operations chief Joseph Formichelli and Chief Financial Officer Roderick Sherwood III reduce costs, spokesman Brad Shaw said. He declined to identify the new executives. The company also may close some of its 272 Gateway Country stores, Shaw said.

Chief Executive Ted Waitt is trying to lower costs while introducing new products, including plasma televisions, and coping with price cuts by larger rivals such as Dell Computer Corp.

Gateway has reduced its workforce by more than half in the last two years to about 11,500 as it has pulled out of Asia and Europe and closed U.S. facilities.

In early December, Waitt said the company needed a couple of strong weeks to reach the low end of its 2002 revenue forecast of $4.3 billion to $4.5 billion.

The changes were reported earlier in the Wall Street Journal, which without attribution said Gateway had weak sales during the holiday season. Shaw declined to comment on holiday sales.

Gateway's third-quarter sales declined 21% to $1.12 billion from $1.41 billion a year earlier amid slack demand worldwide for PCs. The company is expected to have fourth-quarter sales of $1.22 billion, the average estimate of analysts surveyed by Thomson First Call. Sales from last year's fourth quarter were $1.14 billion.

Formichelli and Sherwood, who both joined Gateway in recent months, are experts in operations, Shaw said. No current executives will be fired, he said.

Shares of Gateway fell 16 cents, or 4.6%, to $3.30 on the New York Stock Exchange. The shares have fallen 66% in the last year.

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