Gateway Inc, the second-largest direct seller of PCs, will fire all 1,050 employees in Ireland and the UK as part of a plan to revive profit by concentrating on sales in the US.
Gateway last month said it would cut 5,000 jobs worldwide and halted business in Asia. The company said Monday it will stop selling computers in southeastern Europe, the Middle East and Africa, as well as Ireland and the UK. The San Diego-based company has already pulled out of the Spanish, German and Swedish markets.
Chief executive Ted Waitt is trying to salvage Gateway as the PC industry braces for its first yearly sales drop since 1985. As rivals such as Dell Computer Corp have cut PC prices to boost sales, Gateway has reported three straight quarterly losses and forecast another this period. The company is hoping that closing its retail stores and exiting markets outside the US, where its brand and distribution aren't as strong, will help restore profit.
"Gateway has a brand that is reasonably recognizable, but it's not one of the world's top brands," said Mark Specker, an analyst at SoundView Technology Group, who doesn't own Gateway shares and rates the stock "hold." The company will fire 900 workers at its Dublin plant, which also served as European headquarters, and 150 in the UK, where it has 14 retail stores, spokeswoman Noeleen Murray said.
Gateway has said its business outside the US kept it from being profitable last quarter. In overseas markets, Gateway didn't have adequate distribution channels, and it was difficult to work with foreign partners, Waitt said in an interview two weeks ago.
The shares fell US$0.05 to US$8.46. The stock has fallen 53 percent this year, while the Standard & Poor's Computer Systems Index has dropped 35 percent.
Researcher IDC said Friday that worldwide PC sales are expected to decline about 1.6 percent this year, the first drop in 16 years, as demand slumps in the US and Japan.
Gateway is realigning into six business lines. Besides personal computers, they will include communications, applications, learning, financing and services. Gateway said it will begin reporting sales and gross profit for each in the fourth quarter.
The company has offered these services for more than a year as part of its strategy, called "Beyond the Box," to sell products with higher margins than PCs.
Waitt, who founded Gateway in 1985, returned as CEO in January after a yearlong absence. He fired his handpicked successor, Jeff Weitzen, and six other executives after sales and profit plummeted. Waitt owned 31 percent of Gateway as of March.
Gateway first said on Aug. 8 it was likely to close its Irish plant. The decision spooked investors, sending the benchmark Irish Stock Exchange Overall Index down 2.3 percent the following day as investors fretted that the fast-growing Irish economy will slow if more overseas technology companies leave Ireland.
Foreign companies and the jobs they brought with them helped fuel a boom in the Irish economy in the 1990s. Gross domestic product grew at an average annual rate of more than 9 percent between 1994 and 2000, making Ireland the envy of its neighbors in the EU.
American companies employed 94,000 people, according to Ireland's Industrial Development Agency. Out of a total workforce of about 1.8 million, about 110,000 people depend directly on employers outside Ireland.
Finance Minister Charlie McCreevy last month cut his forecast for economic growth this year. McCreevy said GDP will expand 7.25 percent this year, less than the 8.8 percent forecast in his December budget.
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