Steps Include: Newly Formalized Lines of Business;
Increased Focus on High-Growth Solutions in the U.S.;
Consolidated Call Center Capabilities Dedicated to Local Markets;
Streamlined Manufacturing and New Local Management Structure
Company Expected to Save $300 Million Annually Through Strategic Steps,
Third Quarter Special Charges of Approximately $475 Million
Gateway Projects Return to Profitability in the Fourth Quarter 2001
SAN DIEGO, Aug. 28 /PRNewswire/ -- Last month, Gateway, Inc. (NYSE: GTW)
announced that it was embarking on a significant acceleration of its strategic
shift to transform the company from a traditional manufacturer of PCs to a
leading provider of personalized technology solutions by better leveraging the
company's existing retail footprint, its powerful brand and its beyond-the-box
solutions leadership.
Today, Gateway unveiled additional measures of a sweeping plan to change
fundamentally its underlying operations and cost structure in alignment with
that strategic shift. These steps round out the company's restructuring,
which began last month with the previously announced creation of its new U.S.
Markets organization and Solutions groups.
The steps announced today include:
* Formalizing six lines of business. In addition to the company's
Hardware business, Gateway will also manage its operations along the
following lines of higher-growth, higher-margin businesses:
Communications, Applications, Learning, Financing and Services.
Gateway will begin reporting revenue and gross profit for each of these
lines of business starting in the fourth quarter.
* An increased focus on these lines of business in the domestic U.S.
market, where the company enjoys strength in its target customer
segments, unparalleled brand awareness, a 296-store retail
infrastructure and steadily growing solutions capabilities. As a
result, the company announced today that it will immediately close
all of its company-owned operations in Malaysia, Singapore, Japan,
Australia and New Zealand. The company is currently engaged in the
employee consultation process in key European markets regarding a
proposal to exit those markets as well, with a definitive announcement
regarding its European operations expected within the next 30 days.
* Consolidated call center capabilities in which sales, service and
support staff within centralized call centers will be aligned with
specific geographic regions and territories in the U.S. in keeping with
the company's new focus on local market execution. This consolidation
will leverage the company's on-going move to better utilize its retail
store network for sales, service and support, and will result in the
closure of call centers in Hampton, Virginia; Vermillion, South Dakota;
Salt Lake City, Utah; and Lake Forest, California. Call centers will
remain in Sioux Falls and North Sioux City, South Dakota; Kansas City,
Missouri; Rio Rancho, New Mexico; and Colorado Springs, Colorado.
* Streamlined manufacturing operations based on the company's shift to a
more simplified product line and the current demand environment. This
new manufacturing model, which significantly improves production
efficiency and flexibility for growth, will result in the closure of
its Salt Lake City manufacturing facility and the development of more
efficient manufacturing operations in Hampton and North Sioux City.
* New local management structure to deliver personalized technology
solutions at the local level to all of the company's customers in the
U.S. Since the announcement of the formation of the U.S. Markets group
on July 19, the company has staffed the management of that organization
and divided it into three primary regions -- East, Central and West.
These three regions are sub-divided into 20 territories, with each
territory having from eight to 26 Gateway retail locations along with
field sales personnel, all of which are supported by a combination of
local and centralized sales, service and support organizations.
The company's preliminary estimates indicate that the above steps, those
previously announced related to the creation of the U.S. Markets organization
and Solutions groups, and related reductions in administrative and support
functions will result in pre-tax special charges for the third quarter of 2001
of approximately $475 million. This estimate includes an amount of
approximately $200 million for the possible exit from the company's European
markets.
This $475 million is comprised of cash and non-cash charges of
$150 million and $325 million, respectively. These steps are estimated to
save the company approximately $300 million in costs and expenses annually.
Notwithstanding the use of cash described above, the company projects it will
exit the year at approximately its current level of cash and marketable
securities of $1 billion. The company believes that its current sources of
working capital and liquidity will provide adequate flexibility for its
financial needs for the foreseeable future.
These steps and reductions in administrative and support functions will
result in approximately a 15% reduction of the company's U.S. workforce and
approximately a 25% reduction in Gateway's worldwide workforce, including the
possible exit of European markets.
"As tough as these decisions were to make, we're doing all the right
things to create a new company with a unique competitive edge and a healthy,
profitable future," said Ted Waitt, Gateway's Chairman and CEO. "We're
planning to win by building a lean, nimble organization that is unified and
focused on our customer base unlike any other time in our history. We intend
to succeed market by market, customer by customer, as the only company that
can deliver personalized technology solutions on a local basis."
Outlook
The company's guidance for the second half of the year is updated with an
expectation to report a slight loss on a pre-tax income basis, excluding
special charges, for the third quarter, while returning to profitability on a
pre-tax income basis for the fourth quarter such that we expect to be
marginally profitable for the entire second half of 2001 on a pre-tax basis,
excluding special charges. The company also expects domestic unit volume to
increase sequentially during the third and fourth quarters.
Conference Call
A special conference call will be held on Tuesday, Aug. 28 at
5:30 p.m. EDT and will be accessible via live audio webcast at
http://www.gateway.com.
About Gateway
Gateway (NYSE: GTW), ranked 194 on the Fortune 500(R), focuses on building
lifelong relationships with consumers, small and medium businesses and
government and education institutions by helping customers meet all their
technology needs. Founded in 1985, Gateway is considered the most admired
American company in the Computers and Office Equipment industry according to a
Fortune Magazine survey (1) and is the top brand in customer loyalty and for
first-time home computer purchases of Wintel-based PCs (2). The company had
total global revenue of $9.6 billion in 2000. For more information, visit
our Web site at http://www.gateway.com.
(1) Fortune Magazine, "America's Most Admired Companies,"
February 19, 2001.
(2) From the Harris Interactive Consumer TechPoll(SM) study of 140,000 PC
owners who use the Internet, released March 5, 2001.
Special Note
This press release contains forward-looking statements that involve risks
and uncertainties, as well as assumptions that, if they do not materialize or
prove incorrect, could cause Gateway's results to differ materially from those
expressed or implied by such forward-looking statements. All statements,
other than statements of historical fact, are statements that could be deemed
forward-looking statements, including any projections of earnings, revenues,
or other financial items; any statements of plans, strategies and objectives
of management for future operations; any statements regarding proposed new
products, services or developments; any statements regarding future economic
conditions or performance; statements of belief and any statement of
assumptions underlying any of the foregoing. The risks that contribute to the
uncertain nature of these statements include, among others, competitive
factors and pricing pressures, including the impact of aggressive pricing cuts
by larger competitors; general conditions in the personal computing industry,
including changes in overall demand and average selling prices, shifts from
desktops to mobile computing products and information appliances and the
impact of new microprocessors and operating software; the ability to transform
the company to a technology solutions provider and restructure its operations
and cost structure; component supply shortages; short product cycles; the
ability to access new technology; infrastructure requirements; risks of
international business; foreign currency fluctuations; ability to grow in
e-commerce; risks of minority equity investments; risks relating to new or
acquired businesses, joint ventures and strategic alliances; risks related to
financing customer orders; changes in accounting rules, the impact of
litigation and government regulation generally; inventory risks due to shifts
in market demand; changes in product, customer or geographic sales mix; the
impact of employee reductions and management changes and additions; and
general economic conditions, and other risks described from time to time in
Gateway's Securities and Exchange Commission periodic reports and filings.
The Company assumes no obligation to update these forward-looking statements
to reflect events that occur or circumstances that exist after the date on
which they were made.
SOURCE Gateway, Inc.
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Related links:
http://www.gateway.com
CONTACT:
Media: Donna Kather, Public Relations,
+1-858-799-2657, donna.kather@gateway.com, or Investor Relations:
Marlys D. Johnson, Investor Relations, +1-605-232-2709,
marlys.johnson@gateway.com, both of Gateway, Inc.
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