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Gateway to Cut 450 Jobs, Close Plant

September 04, 2003|Terril Yue Jones | Times Staff Writer

Personal computer maker Gateway Inc., which has lost money in 10 of the last 11 quarters, said Wednesday that it would eliminate more than 450 jobs by closing one of its two computer plants and reducing staff at two other facilities.

The moves, which cut Gateway's workforce by at least 5.3%, are part of a plan to save money by relying more on outside partners for computer assembly and customer relations.

Poway, Calif.-based Gateway said it would wipe out 450 jobs by shuttering its desktop computer plant in Hampton, Va. The company also will make cuts at two locations in South Dakota: in North Sioux City, home to a call center along with administrative and manufacturing facilities; and in Sioux Falls, which has a call center and operations for parts fulfillment and technical support.

The cuts will save as much as $130 million a year on top of the $400 million in annual savings Gateway has achieved through other streamlining efforts, the company said. The computer maker will record up to $160 million in expenses over three quarters to pay for the restructuring.

The cost cutting is driven by price pressure from much larger and more efficient rivals Dell Inc. and Hewlett-Packard Co. Gateway already has eliminated 1,900 jobs and closed 82 of its 272 retail stores this year in its attempt to stem the red ink. It lost $73 million on revenue of $800 million in its most recent quarter.

At the same time, Chief Executive Ted Waitt has tried to boost revenue and profit by expanding Gateway's product lineup to include a wide range of consumer electronics gadgets from TVs to digital music players.

"We have spent the past six months transforming our products, our retail network and our marketing efforts," Waitt said. Now, the company is "completely redesigning our sourcing, logistics, service and support systems to create a more efficient infrastructure as the backbone of the new Gateway."

Gateway's shares rose 2 cents to $6.10 on Wednesday on the New York Stock Exchange.

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