Gateway ends outsourcing deal with ACS

The move came after it closed its Gateway Country stores

After closing all 188 of its Gateway Country retail stores last month (see story), computer company Gateway Inc. has reached an agreement with outsourcing vendor Affiliated Computer Services Inc. (ACS) to terminate a seven-year services contract the companies signed last September.

In an announcement yesterday, Dallas-based ACS said the contract is being terminated mutually because of changes required by Gateway since it closed its retail stores.

Over the next 90 days, ACS will transition the outsourced operations, which include IT operations, human resources, finance, accounting and business process outsourcing services, back to Gateway. The contract produced revenue of $14 million during the outsourcing vendor's third quarter, which ended March 31, 2004.

Also affecting the termination of the deal was Gateway's acquisition in March of Irvine, Calif.-based computer vendor eMachines Inc., which has led to strategy changes for Gateway, including the closing of the stores and the layoffs of some 2,500 workers (see story). The company announced late last month that it planned another 1,500 layoffs as part of a continuing effort to streamline its operations (see story).

Lesley Pool, an ACS spokeswoman, said it was a "mutual agreement that it just made sense to end the contract. In the direction that Gateway is going ... it just eliminated the need for our services."

In a prepared statement, Jeff Rich, CEO of ACS, called the contract termination "a very amicable parting from both a business and financial perspective."

A spokesman for Poway, Calif.-based Gateway couldn't be reached for comment by press time.

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