Gateway to Close Facility, Cut Jobs

 
 
By Jeffrey Burt  |  Posted 2003-09-03
 
 
 
Gateway Inc. will shut down a manufacturing facility in Virginia and rework how it does product sourcing, support and service in moves officials said will save the company $115 million to $130 million a year.

Chairman and CEO Ted Waitt said Wednesday that the moves were part of a larger plan to transform the Poway, Calif., company from a PC maker into a larger player that sells everything from enterprise servers to plasma TVs.

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

Part of that plan is to shut down a manufacturing plant in Hampton, Va., on Sept. 30. According to spokesman Bob Sherbin, the company will cut 450 jobs with the closing of the Virginia manufacturing facility.

More jobs will be lost at Gateways Sioux Falls and North Sioux city locations in South Dakota as tasks are shifted to partners or other facilities. How many jobs will be lost in South Dakota has not yet been determined, but the company will have more details by the time it releases its third-quarter earnings in October, Sherbin said.

As part of the reconfiguring of its sourcing operations, Gateway will shift some responsibilities to strategic partners, and also will work more closely with suppliers, officials said. They also said the company will consolidate various in-house operations.

Sherbin declined to be more specific about which fulfillment tasks will be kept by Gateway and which will be outsourced to parnters. "Some of the contracts for those have not been signed yet, so were not really discussing them," he said.

Gateway will create regional hubs for service and shipping, in hopes of reducing response times to customers and cutting down on logistics expenses.

The company expects to take transformation charges of $120 million to $160 million, spread over the current fiscal quarter and the following two quarters.

Officials said the new fulfillment model, which will be in place by mid-November, will enable the company to more efficiently build, ship and support the growing number of products it is offering.

Gateway is looking to expand beyond its PC-making roots. Already this year it has launched a new line of servers, and last month unveiled its first storage products. It also is growing its consumer product lines, from digital cameras to DVD players. The company suffered a recent setback when it indefinitely delayed the scheduled July launch of its handheld computers due to problems gaining software and accessories partners.

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