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Inouye Resigns As Gateway’s CEO

2/09/2006 11:08:00 AM Eastern

Irvine, Calif. — With the poor performance in 2005 of Gateway's direct-to-consumer and professional businesses heavily accentuated, the company’s board today announced the resignation of CEO Wayne Inouye.

Inouye cited a desire to pursue other interests as the reason behind the resignation, but his decision came on the heels of the company’s fourth-quarter and year-end 2005 financial report that showed Gateway performing well at retail, but poorly in its other areas. Inouye joined Gateway when it acquired eMachines and was named CEO/president when that deal was finalized in March 2004.

He will be replaced an interim basis, effective immediately, by board chairman and former Gateway COO Richard Snyder. The company has launched an immediate search for a replacement and expects to complete the task by late summer.

“The retail business is doing well and we expect it to keep doing well, but there are a fair number of things to do in the professional and direct space,” Snyder said.

He did admit that Inouye’s absence will pose a challenge for Gateway’s retail because Inouye built its relationships with its channel partners. However, Snyder did express total confidence that Bob Davidson, U.S. retail senior VP, has the situation well in hand.

Snyder did not give any specifics on what steps will be taken but said Gateway will try to recapture the characteristics that made eMachines and Gateway successful when they were separate entities.

“eMachines has a legacy of being an innovator at retail and very customer centric. The direct business is not growing or flourishing so we want to figure a way to excite the customer about Gateway. To bring back the sparkle,” Snyder said, adding that Gateway was once viewed as a unique player in the direct market.

“I found it interesting the board felt it needed a new CEO instead of someone handling [the direct and professional business] who would work for Wayne,” said Steve Baker, NPD Techworld’s industry analysis director.

Baker added that the direct business has been tough even for industry leader Dell during the past few quarters.

Inouye led Gateway through one of its most turbulent periods. Under his guidance the company eliminated what at the time was a recently revamped retail store operation starting in April 2004, dropped its nascent CE merchandise line and started to push Gateway-branded computers into the retail market with the intention of bringing the company back to its roots as a strong PC vendor.

The company has no intention of retrenching itself in the consumer electronics market, Snyder said.

In the short term, Snyder plans to follow the 2006 annual operating plan devised by Inouye.

No other management changes were announced or planned nor is their any desire to sell the company. The changes made will not require a major financial investment, said John Goldsberry, Gateway chief financial officer.

Gateway released its fourth-quarter and year-end numbers on Feb. 3. Fourth-quarter revenue at PC maker Gateway increased 8 percent, reaching $1.1 billion from $1 billion the previous year.

The company moved into the black in the three months, ended Dec. 31, with net income coming in at $22.4 million, compared with a loss of $6.6 million in the same period in 2004. Fourth-quarter results included $13.8 million of benefits. The retail business delivered revenue of $792 million, up 31 percent year-on-year. Retail PC unit volume increased 23 percent from the previous year, hitting 1.1 million. Gateway said dollar increases were due to market-share gains in U.S. retail.

For the 12 months, Gateway increased to $3.9 billion from a year-earlier $3.6 billion. The company had net income of $49.5 million in the 12 months, compared with a year-ago loss of $567.6 million. Total PC unit sales for the 12 months were 4.5 million units, up 27 percent over the prior year.

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