Update: Gateway to close all retail stores April 9

IDG News Service - Gateway Inc. announced yesterday that it plans to close its entire network of 188 retail stores next week and lay off about 2,500 staffers.
The stores will be closed April 9, Gateway said in a statement. The PC vendor will continue to sell products directly to customers over the Web and by phone, and it will seek to expand its presence in other retail outlets.
The move comes less than a month after Gateway completed its acquisition of PC vendor eMachines Inc. and named former eMachines CEO Wayne Inouye as its new CEO.
Part of Gateway's motivation for buying eMachines was to have access to its retail channels, which include most of the big electronics stores in the U.S., said Rob Enderle, principal analyst at The Enderle Group. The electronics stores provide a better outlet for Gateway to sell its products, particularly as it tries to expand beyond PCs and into consumer fare such as flat-screen TVs.
Maintaining its own stores would have put Gateway into conflict with the other retail outlets, so a move to close its properties was an obvious decision to make, Enderle said. "Gateway made a strategic decision. Either the [Gateway] stores had to go, or the retail channel had to go."
Gateway spokesman Brad Williams called that an oversimplification but acknowledged that concerns among the company's channel partners were a factor in its decision. "It's indicative of where we're heading. We'll be putting a greater reliance on the retail channel and working to reduce our operating costs," said Williams.
"Distributing through other retailers allows us to cost-effectively expand our retail [sales]," he said. "It far outstrips the 188 doors that Gateway machines were in.
"We gave it a good try," he said of the stores, which first opened in 1996. At their peak in 2001, there were just over 320 stores across the country.
The job cuts amount to a 38% reduction in Gateway's total head count, leaving it with about 4,000 employees. The vast majority of those to be laid off worked in the stores themselves, with the rest involved in their operation, Williams said.
Poway, Calif.-based Gateway will offer more details about its branding and channel strategy and discuss any cost implications of the closures when it announces its first-quarter financial results on April 29.
Ted Waitt, Gateway's outgoing CEO, remains the company's chairman and its largest stockholder.
Gateway's revenue took a dramatic dive in its fourth quarter, which ended Dec. 31, as its PC business slowed and it worked to reinvent itselfas a provider of more general electronics gear, including plasma television screens, digital cameras and camcorders. Revenue for the period dropped to $875 million from $1.1 billion a year earlier, the company said in January.
Gateway's purchase of Irvine, Calif.-based eMachines was valued at more than $234 million in cash and stock when the deal was announced early this year. With the acquisition, Gateway said its hopes to become the third-largest PC vendor in the U.S. and the eighth-largest in the world.
Computerworld's Todd Weiss contributed to this story.

Reprinted with permission from

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