Gateway will lay off 5,000

Associated Press

SAN DIEGO — Gateway, the nation’s No. 4 manufacturer of personal computers, said Tuesday it is laying off about 5,000 employees — around one-quarter of its global work force — because of an increasingly bleak market.

The company said it now expects to return to profitability in the fourth quarter. Previously, officials said they did not expect that to happen until fiscal 2002.

"As tough as these decisions were to make, we’re doing all the right things to create a new company with a unique competitive edge and a healthy, profitable future," said Ted Waitt, Gateway’s founder, chairman and CEO. "We’re planning to win by building a lean, nimble organization that is unified and focused on our customer base unlike any other time in our history."

Shares of Gateway rose nearly 7 percent, or 59 cents, to $9.19 in after-hours trading, adding to a 10-cent gain during the regular session on the New York Stock Exchange.

About 15 percent of the company’s U.S. work force will be cut under the plan, which the company said will help it save $300 million annually. The layoffs follow an earlier wave of job cuts and a management shake-up which brought Waitt back to the company’s helm after a brief retirement. Gateway cut about 3,000 employees in January.

The cuts will leave Gateway with about 19,000 workers worldwide.

Gateway said it will take a one-time charge of $475 million in the third quarter due to the restructuring.

Gateway will immediately close all of its company-owned operations in Malaysia, Singapore, Japan, Australia and New Zealand. The company also will close customer service and sales centers in Hampton, Va.; Vermillion, S.D.; Salt Lake City and Lake Forest, Ill.

Gateway posted a loss of $20.8 million for the quarter ending June 30, compared with a profit of $118 million for the same period a year ago.

Waitt said the layoffs are part of the company’s strategy to diversify its product line and return to profitability by the fourth quarter of fiscal 2001.

"We feel pretty good about the strategic steps we are taking," Waitt said.

In July, Gateway said it planned to move beyond PC sales. The company said it would aggressively market home networks, computer consulting and financing packages for consumers, schools and small businesses.

The PC industry saw its first-ever drop in sales this year. Some analysts predict it won’t recover until next year or early 2003.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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