CompUSA to Sell Gateway PCs

After shutting down its own retail stories, Gateway continues to look for ways to expand the number of outlets selling Gateway-branded products.

Gateway Inc. continues to expand its distribution channels, announcing Monday that CompUSA Inc. will now sell Gateway desktops in its 226 retail stores nationwide.

The move follows through on a promise by new President and CEO Wayne Inouye to expand the number of outlets selling Gateway-branded products after the Poway, Calif., company shut down its own 188 retail stores earlier this year.

Its also a continuation of Gateways attempts to adopt some of the business practices developed by eMachines Inc. under Inouye. Gateway bought the company for $290 million in March, and brought eMachines CEO Inouye to take over the top spot at Gateway. Founder and former CEO Ted Waitt remains as chairman of Gateways board, but no longer controls day-to-day operations.

Best Buy Co. Inc. already sells Gateway desktops and notebooks, and Inouye had promised that other electronics retailers would be brought on board. Many of these—including CompUSA and Best Buy—already sell eMachines systems.

Gateway, which also sells its products via direct channels, is offering Gateway products as high-end offerings—above $700—and eMachines systems for the volume space.

"This represents another significant step forward in ensuring that the Gateway brand is widely available at the retail outlets where our customers shop," Inouye said in a prepared statement. "CompUSA is an excellent distribution channel for us and we look forward to working with them to make our desktops available to their millions of customers."

The eMachines acquisition has had an immediate impact on Gateway, which has streamlined its management hierarchy, shut down an operations facility in Sioux Falls, S.D., and consolidated some of its enterprise offerings. The company, which is hoping to return to profitability in 2005, also intends to cut its payroll to below 2,000 people, down from 3,400 at the close of the second quarter.

It hasnt been an easy transition. In reporting second-quarter earnings late last month, Gateway officials said the company lost $339 million, due in large part to the absorption of eMachines and the closing of its retail stores. At the same time, the addition of revenue from the sales of eMachines products lessened the blow, they said.

During the earnings call, Inouye said Gateway was returning to its PC roots. Waitt, in his final year as CEO, tried to grow the company beyond PCs and into a systems integrator, a move that failed to generate the needed revenue boost.

The acquisition of eMachines has made Gateway the third-largest PC maker in the United States, behind Dell Inc. and Hewlett-Packard Co.


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