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Gateway Ends Retail Operation, Cuts 2,500 Workers

Poway, Calif. – Gateway ended its seven-year run as a retail chain owner yesterday when the company announced it would shutter its 188 stores and lay off 2,500 workers.

The move comes shortly after Gateway completed two projects: a costly refurbishing of the chain’s locations to better sell the company’s new line of consumer electronic products; and the finalization of its $290 million acquisition of entry-level PC maker eMachines.

The chain will officially be closed on April 9. At one point, the company ran more than 300 stores, but this number was slowly trimmed back over the past two years.

Gateway gave no specific reason for the move, but company founder and chairman Ted Waitt and CEO Wayne Inouye, former CEO of eMachines, said during the merger process that Gateway’s plan is to use eMachines’ established retail relationships to place Gateway CE products in third party retailers. Prior to yesterday’s announcement, the two executives never directly responded to the question of whether such a move would be viewed as a conflict by other retailers, but any potential conflict has been removed.

Gateway also started selling a computer SKU through an outside retailer. In the past month it signed on to sell a notebook through Office Depot. It has also sold through various wholesale clubs on an on-again, off-again basis. The company has not indicated whether it will follow this move up with additional products or stick with its previously announced plan to only market eMachines branded products at retail.

The company is also looking to leave its headquarters here and move by this summer to Irvine, Calif., the site of eMachines former offices. Due to the small size of eMachines old digs Gateway is not likely to move into eMachines building, but will look for a suitably sized facility to house the combined staffs.

The layoff of Gateway’s retail work force follows close on the heels of a major shake-up in its executive management team that was announced earlier this week.

Bill Parker, president and general manager of Gateway retail stores, remains on staff, the company spokeswoman said, to oversee the chain’s shut down. Parker was brought on board in Jan. 2003 from The Gap clothing retailer.

Effectively immediately, Adam Anderson is senior VP, chief administrative officer and will handle strategy and administrative functions. Bob Davidson is senior VP, U.S. retail; he previously was eMachines executive vice president for global planning and will now oversee sales of Gateway PC and CE products through third party retailers. Ed Fisher was named senior VP, product planning; he is another eMachines alumnus where he served as senior VP of global sales.

John Goldenberry was tapped as senior VP, business development; he had been eMachines chief financial officer, and is now responsible for long range plans and strategies and developing new business opportunities and partnerships. Mike Hammond was promoted to senior VP, general manager of the firm’s North Sioux City, N.D. operation; his previous posting was as senior VP of operations.

Gateway’s new IT/web senior VP is Andy Lee. He had been CEO and chairman of Alorica, an enterprise software developer. He will oversee the company’s Web and IT operations. Greg Memo was tapped as senior VP of platform development and operations; he previously served as eMachines’ executive VP, global development and operations.

Gateway’s Rod Sherwood is now senior VP, chief financial officer; his previous title was chief financial officer. Scott Weinbrandtis is now senior VP, professional; previously, he served as Gateway’s senior VP and general manager, enterprise systems division. Mike Zimmerman, formerly eMachines’ executive VP of global customer care and quality assurance, takes on the role of senior VP, customer care.

Gateway also appointed three people to temporary positions until the company makes permanent appointments. Bob Burnett is senior VP, international; Erik Gerson is senior VP, consumer direct; and Brad Shaw is senior VP, marketing.

The shake-up resulted in several Gateway executives being forced out the door. These are Jocelyne Attal, executive VP, professional; Scott Edwards, executive VP, consumer; Joe Formichelli, executive VP, operations; Nemo Asamian, senior VP, customer services and support; Steve Philips, senior VP and chief information officer; and John Engel senior VP, PC products group.

Gateway completed its acquisition of eMachines earlier this month and is still in the process of consolidating the two companies’ operations.