Formichelli Joins Gateway

Industry veteran Joe Formichelli will be responsible for Gateway's performance on everything from PC sales to its nationwide chain of 272 Gateway Country Stores.

Gateway Inc., the hard-hit PC maker that has tried various strategies to stem the tide of poor quarterly financial reports, is starting the new year with a new executive vice president of operations.

Joe Formichelli, a 30-year industry veteran whose resume includes runs as vice president of worldwide systems operations at IBM and vice president and general manager of Toshibas Computer Systems Group, will be responsible for Gateways performance on everything from PC sales to its nationwide chain of 272 Gateway Country Stores.

In announcing his appointment, Gateway Chairman and CEO Ted Waitt said Formichelli will be instrumental as "Gateway continues to evolve from a PC maker into a provider of personalized technology solutions [in] ensuring that our operational excellence is on par with any competitor."

But it will be a tough battle. Gateway, of Poway, Calif., hasnt had a profitable quarter since 2000, and just completed a poor holiday season that saw the company—like other competitors—cut PC prices in hopes of stirring up business. Gateway even rolled out a buy-one-get-one-free strategy.

Gateway executives had predicted a difficult holiday season when they announced third-quarter earnings in October.

Roger Kay, an analyst with International Data Corp., in Framingham, Mass., said one of the first things Formichelli may look at will be the Country Stores, which he called "a risky strategy from the beginning."

Driving sales via the telephone and Internet allows a company to easily scale up or down expenses related to the volume of sales, Kay said.

"But a store is just there, day in and day out, and the meters running," he said.

Kay also was unclear how Formichellis role will develop.

"Hes more of an enterprise guy, but I cant see them really targeting the enterprise now," he said. "Theyve really been consumer-focused."

Since retaking the reins of the company in 2001, Waitt has tried a number of strategies to boost Gateways sales, from slashing prices to introducing high-end plasma screens. Recently the company entered the grid computing arena.

None has been tremendously successful, although Kay would not criticize Waitt for his attempts.

"You just cant sit around," he said. "If theres been a bit of thrashing about in strategy, in a sense that is not a bad thing."

On Tuesday, Gateway also named two people to head the companys business and consumer segments.

David Turner, the companys senior vice president of sales and marketing, will lead Gateways business segment, focusing on its customers—particularly in the small and mid-size business area—as well as government and education accounts.

T. Scott Edwards, most recently senior vice president of Sony Electronics Inc.s consumer marketing division, will be executive vice president of Gateways consumer business.