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Gateway To The Unemployment Line

Gateway Inc., the nation's fourth-largest computer maker, announced Thursday that it will eliminate 2,250 jobs around the country in an effort to cut costs amid reduced sales and a shrinking share of the U.S. market.

The company will also eliminate offices in Southern California, Massachusetts, New Mexico and Colorado and close 19 of its Country Stores in nine states.

Gateway, which cut 5,000 workers last year, or nearly a quarter of its work force, does not expect any more layoffs this year, Chief Financial Officer Joe Burke said.

"We think this gets us to the right level," he said.

Gateway plans to close its marketing, engineering and administrative office in Lake Forest; its Web sales office in Beverly, Mass; and tech support centers in Rio Rancho, N.M., and Colorado Springs, Colo. Those closings total 1,180 layoffs.

The company will also cut 480 jobs at its North Sioux City, S.D., manufacturing, sales and support center; 15 from sales and service department in Sioux Falls, S.D.; 240 from manufacturing center in Hampton, Va.; 30 from an information technology center in Denver; 30 from a sales and service center in Kansas City, Mo.; and 30 at its headquarters in the San Diego suburb of Poway.

Gateway is closing 19 underperforming Country Stores in California, New York, New Jersey, Florida, Washington state, Ohio, Texas, Michigan and Illinois.

The company on Thursday reported a net profit of $5.1 million, or 2 cents per share on revenue of $1.1 billion for the fourth quarter of 2001, excluding one-time gains.

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During the same period in 2000, Gateway posted a loss of $128 million on revenue of $2.4 billion.

"We said we'd return to profitability in the fourth quarter and we did," said Ted Waitt, the chairman and chief executive officer.

That profit came despite the fact that domestic computer saes fell 17 percent to 681,000. After Gateway warned of the lower sales earlier this month, the rating agency Moody's Investors Service Inc. downgraded the company's debt rating to junk status.

The warning prompted one analyst, Ashok Kumar of US Bancorp Piper Jaffray, to write that the computer company was "struggling with an unsustainable business model."

The company, which is turning its focus to more profitable, higher-end systems, lost market share in the fourth quarter but remained the No. 4 computer maker in the United States, according to preliminary findings by IDC, a technology market research firm in Framingham, Mass.

Gateway's fourth-quarter share of the U.S. market fell to 6.3 percent from 7.8 percent. The industry leader continued to be Dell Computer Corp. at 27.5 percent, followed by Compaq Computer Corp. and Hewlett-Packard Co.

"They still have enough market share to remain one of the top five PC makers in the United States," said IDC analyst Alan Promisell.

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