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Sat, May 10, 2003 - Page 12 News List

Gateway expands to begin offering electronic gadgetry

AP AND BLOOMBERG , SAN DIEGO

Gateway Inc said it will vastly expand its offerings in consumer electronics and remodel its 192 stores this year in an effort to bolster sales by expanding beyond personal computers.

The new gadgets and gizmos will include 12 to 15 televisions and probably digital cameras and camcorders, Ted Waitt, chairman and chief executive of Poway, California-based Gateway said Thursday. The new televisions will be ultra-slim plasma or liquid crystal displays, rear-projection TVs or sets that combine DVD and home theater systems.

Gateway shocked the consumer electronics industry last November when it introduced a 42-inch plasma television for around US$3,000 -- hundreds of dollars below competitors.

The televisions will be Gateway branded, but some other products may carry other names.

Gateway declined to offer specifics on pricing. The company also declined to say how much it would cost to remodel its stores by the end of this year.

About 100 stores will be significantly changed and 80 will get a lighter facelift.

The campaign is Gateway's latest effort to snap its two-year slide. The company has closed 80 stores this year and shed 1,900 of its 11,500 employees. In the last two years, the company has eliminated 10,000 jobs and posted steep losses.

"I think they've been serially restructuring," said Steve Baker, an analyst at NPDTechworld, an industry consulting firm in Port Washington, New York.

The company, which has lost money in nine of the last 10 quarters, says it's "comfortable" with analysts' estimates for losses in the current and next two quarters.

Analysts are expecting losses of US$0.27 a share on sales of US$798 million in the second quarter, US$0.19 on US$893 million in the third and US$0.9 on $964 million in the fourth quarter, Chief Financial Officer Roderick Sherwood said at an analyst meeting in San Diego. Gateway, the third-largest US maker of personal computers, still might be able to make a profit in the fourth quarter, Sherwood said, fulfilling a prior pledge.

"We expect to be cash-flow positive in [this year's fourth quarter] with the upside potential to be profitable," Sherwood said.

Gateway is introducing 50 products this year that aren't PCs because that industry's growth will be flat to moderate in coming years, Chief Executive Ted Waitt said at the meeting. Gateway, which has been losing market share to rivals such as Dell Computer Corp, has fired workers and shut stores this year to cut costs.

"[Last year] it became clear we didn't grow our PC business as much as we would have liked," Waitt said.

Gateway will be expanding into products such as hand-held computers, storage devices and even furniture for its large- screen televisions. Gateway last November introduced plasma-screen TVs, which Waitt called a success.

"It proved to us that the Gateway brand can scale to many other products beyond just PCs," Waitt said.

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