Gateway will close its entire network of 188 retail stores next week and lay off about 2,500 staff, the PC maker announced yesterday.
The stores will close on April 9, Gateway said. It will continue to sell products directly to customers over the Web and by phone, and will seek to expand its presence in other retail outlets, the company said.
The move comes less than a month after Gateway completed its acquisition of PC vendor eMachines and installed a new CEO, Wayne Inouye, who previously was eMachines' CEO. Ted Waitt, Gateway's outgoing CEO, remains its chairman and its largest stockholder.
Part of Gateway's motivation for buying eMachines was to have access to its retail channels, which include most of the big electronics stores in the US, said Rob Enderle, principal analyst with The Enderle Group. Those electronics stores provide a better outlet for Gateway to sell its products, particularly as it tries to expand beyond PCs and into consumer fare such as flat-screen TVs, he said.
Maintaining its own network of stores would have put Gateway into conflict with the other retail outlets, so a decision to close its own properties was an obvious one to make, Enderle said.
"Gateway made a strategic decision: Either the (Gateway) stores had to go, or the retail channel had to go," he said.
A spokesman for Gateway called that an oversimplification, but acknowledged that the concerns of its channel partners were a factor in its decision. "It's indicative of where we're heading – we'll be putting a greater reliance on the retail channel and working to reduce our operating costs," said Gateway spokesman Brad Williams.
The job cuts amount to a 38 per cent reduction in Gateway's total headcount, leaving it with about 4,000 employees. The vast majority of those to be laid off worked in the stores themselves, with the rest involved in their operation, Williams said.
Gateway will offer more details about its branding and channel strategy, and discuss any cost implications of the closures, when it announces its first-quarter financial results on April 29, the company said.
Gateway's revenue fell in the fourth quarter, ended December 31, as its PC business slowed and it worked to reinvent itself as a provider of more general electronics gear. Revenue for the period dropped to $875 million, from $1.1 billion a year earlier, the company said in January.
The company’s purchase of eMachines was valued at more than $234 million in cash and stock when the deal was announced early this year. With the buy, Gateway said it hopes to become the third-largest PC company in the US and the eighth-largest PC vendor in the world.