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Gateway Slashes Staff, Closes Stores

3/18/2003 08:46:00 AM Eastern

Poway, Calif. - Gateway reported yesterday it would close 76 stores and slash about 1,900 jobs in an attempt to generate $200 million in savings and get the PC vendor and retailer back on a healthy financial footing.

In addition, the company hopes to save another $200 million through component cost reductions, supply chain efficiencies, manufacturing productivity and end to end warranty costs. Most of the positions cut will come from the company's retail sector.

'We're taking the tough but necessary steps to continue our transformation and back to healthy growth,' said Gateway chairman Ted Waitt.

As Gateway makes these moves it announced plans to expand its consumer electronics and computer product lines and make additional alterations to its Country Store chain.

Gateway, which introduced a branded 42-inch LCD TV last year, will flesh out its consumer electronics merchandise mix with the addition of a wide array of digital displays, audio products and video gear. In its core computer products segment Gateway said it will focus less on hitting low price points and instead deliver higher margin PC systems and will enhance its mobile computing category by adding PC Tablets and handheld computers to the mix.

Despite eliminating about 29 percent of its Country Store chain, Gateway intends to upgrade the layout of its remaining stores to better handle its newly diversified product mix. While the company did not discount shedding more non-profitable stores, Waitt said he is looking into several new retail concepts that would be unveiled this spring.

All of these moves came in the wake of Gateway releasing its financial outlook for its first quarter. It expects to generate between $820 million and $850 million in revenue with gross margin dollars in the $112 million to $120 million range. Earnings per share will be at a loss of $0.62 to $0.66.

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