In the wake of its acquisition of eMachines Inc., Gateway Inc. will cut another 1,500 jobs by the end of the year as it continues its push toward profitability, the company revealed during its first-quarter earnings call Thursday.
The job cuts will come on top of the 2,500 positions lost when the Poway, Calif., company closed its 188 retail stores last month, a move that Gateway officials said would save about $60 million.
The cuts are part of an initiative by new CEO Wayne Inouye to streamline the company after its $290 million purchase of eMachines last month. Inouye, who was eMachines CEO before the acquisition, has moved quickly to put his imprint on Gateway, shaking up the executive management team and aggressively moving ahead with a plan to put Gateway systems on retail store shelves next to eMachines computers.
The first of the major retail deals will be announced in the next few months, and more will be in place in time for the Christmas season this year, Inouye said during a conference call with analysts. He said Gateway is talking to such electronics outlets as Circuit City Stores Inc. and Best Buy Co. Inc.
According to the executive, the key reason for closing the stores was not to disrupt the channel partnerships that eMachines had built up over the years and that competed with the Gateway stores. Inouye said the reception from the channel regarding selling Gateway products has been promising.
“Weve been very encouraged by our discussion with potential retail partners,” he said.
The management shakeup included bringing several eMachines executives into the ranks in Gateway, and to cut about two dozen vice president-level jobs, he said. The company now has 13 executive vice presidents, with fewer than 36 vice presidents reporting to them. Gateway this summer also will move its headquarters north to a location in Orange County, Calif., closer to eMachines old base in Irvine, Calif.
For those employees remaining, their compensation will be “heavily weighed toward incentives,” Inouye said.
At the same time, Gateway is simplifying its product line, reducing the number of PC platforms in both the consumer and enterprise spaces, and ensuring that they use common parts.
For the quarter, Gateway reported a loss of $166 million on $868 million in revenue for the first quarter, the first earnings report following its acquisition of eMachines. Gateway lost $200 million on $844 million revenue during the same time last quarter.
Gateway officials called the results preliminary as they continue to work out tax and legal issues. They said they expect $798 million in revenue for the second quarter.