Sale Enables Company to Concentrate on Worldwide Consumer Market, Simplify
its Business Model, and Leverage Reduced Cost Structure
Irvine, Calif., Sept. 5 /PRNewswire-FirstCall/ -- Gateway, Inc. (NYSE:
GTW) today announced that it has signed a definitive agreement to sell its
Professional business segment, including the company's Nashville-based
configuration center, to MPC Corporation (Amex: MPZ). The transaction,
valued at approximately $90 million based on MPC's closing price on Sept.
4, 2007, is subject to regulatory approval and is anticipated to close
early in the fourth quarter.
"Gateway is widely recognized as a leading consumer brand and this
enables us to concentrate our efforts on our worldwide consumer channels,"
said Ed Coleman, Gateway's CEO. "While our performance in the highly
competitive Professional segment has improved, we believe a more focused
approach on the largest segment of our business is in the best interests of
investors and consumers alike."
With double digit-share of the U.S. consumer PC market, and an even
stronger share of the retail channel, Gateway embarked on a consumer
focused strategy early this year. The sale of its Professional business
will simplify the existing business model and enable greater emphasis on
growing the company's overall consumer business, both in the U.S. and
internationally.
"This is yet another step in maximizing the importance of Gateway's
powerful foundation as a consumer brand," continued Coleman. "Coupled with
continued product innovation and a strong presence in retail and direct
channels, this enables us to further drive a strategy that sharpens our
focus, not only in the U.S. but abroad as well."
Gateway's Professional business targets businesses, government agencies
and educational institutions. Once the deal closes, a significant portion
of Gateway's Professional employees will join MPC and continue to work out
of the North Sioux City, SD facility. MPC will assume Gateway's ownership
in its final assembly facility (GCC) located in Nashville, Tenn., and will
take full responsibility for this facility, including the assembly of
Gateway Professional products produced there. MPC will also acquire the
portion of Gateway's Consumer Direct unit that targets businesses with less
than 100 employees.
The combination of Gateway Professional and MPC will greatly benefit
existing Professional employees and customers. In joining with MPC, Gateway
Professional will become part of a business that is dedicated to the unique
and specialized requirements of professional customers. For these
customers, Gateway's portfolio of award-winning Professional products will
be augmented by MPC's products and services. MPC will continue to offer
Gateway Professional products to ensure product stability for Professional
customers, however, the product branding will be migrated from the Gateway
brand to the MPC brand within a year.
"We believe that the customers of MPC and Gateway's Professional
business will benefit greatly from this combination," said John P. Yeros,
Chairman and CEO of MPC Corporation. "The new company will be totally
focused on the markets of government, education, and small-and-medium
business, and will develop products and services to meet the specific needs
of these customers."
As part of the transaction, MPC will assume responsibility for all
operations and warranty support associated with Gateway's Professional
business, valued at approximately $60 million. In addition, Gateway will
invest approximately $10 million in MPC in the form of a note issuance tied
to excess inventory at the GCC. Gateway will receive a 19.9% equity stake
in MPC Corporation at the close of the transaction. As part of the
transaction, Gateway will take an impairment charge of approximately $16
million predominantly related to IT assets associated with the Professional
business. The final numbers will be determined upon the close of this
transaction.
Gateway's Professional business generated $75 million in gross margin
dollars over the past four quarters (Q3 2006 -- Q2 2007). As a result of
the sale of its Professional business, assuming it closes, Gateway expects
that it will be able to streamline its total SG&A by $130 million to $150
million annually, following a transition period and its attendant costs.
"On behalf of the Gateway Board and management team, I'd like to thank
our Professional employees for their hard work and commitment over the
years," said Coleman. "I'd also like to thank our Professional customers
for their loyalty to Gateway, and believe that the combination of Gateway
Professional and MPC will result in a highly-focused organization that can
better compete and thrive in this competitive segment."
About Gateway
Since its founding in 1985, Irvine, Calif.-based Gateway (NYSE: GTW)
has been a technology pioneer, offering award-winning PCs, servers and
related products to consumers, businesses, government agencies and schools.
Gateway is the third largest PC company in the U.S. and among the top ten
worldwide. The company's value-based eMachines brand is sold exclusively by
leading retailers worldwide, while the premium Gateway line is available at
major retailers, over the web and phone, and through its direct and
indirect sales force. See http://www.gateway.com for more information.
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 forward-looking statements, including any
projections or preliminary estimates of earnings, revenues, or other
financial items; any statements of plans, strategies and objectives of
management for future operations; the extent of seasonal changes in demand;
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, risks related to shifting our
distribution model to third-party retail; 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
simplify the company's business, change its distribution model 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; 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; 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.
Gateway assumes no obligation to update any forward-looking statements to
reflect events that occur or circumstances that exist after the date on
which they were made.
SOURCE Gateway, Inc.
 back to top
Related links:
http://www.gateway.com/
CONTACT:
David Hallisey of Gateway, Inc.,
+1-949-471-7703, david.hallisey@gateway.com; or Angela Lewton of
MPC Corporation, +1-208-893-3843, amlewton@mpccorp.com
|
