Gateway Looks to Pull Back Overseas

Struggling computer maker Gateway Inc. is taking steps toward closing one of its two overseas manufacturing plants and may exit the European and Asian markets entirely, company officials said Wednesday.

As required under laws in Britain, the company has begun consulting with its work force about a possible closure of its factory in Dublin, Ireland, said Gateway Vice President Brad Shaw.

Overseas sales produced $183 million out of Gateway’s $1.5 billion in revenue last quarter, but the operations aren’t profitable. Founder and Chief Executive Ted Waitt, who returned to run the company this year, has pledged to restore the company to profitability by focusing on desirable markets and emphasizing services.

“We’re looking at it market by market,” Shaw said. “We are purposefully making ourselves a smaller company.” Gateway has 2,500 of its 20,000 workers overseas and has announced domestic layoffs this year.

San Diego-based Gateway is the second-largest seller of PCs directly to consumers, after Dell Computer Corp. Gateway has been hammered by falling industry demand, a price war and some inefficient operations.

Shaw said Gateway will pull back from international markets, cutting 50 overseas retail stores, if the company can’t earn a profit there. In the U.S., the company has reorganized face-to-face sales around 300 Gateway Country stores, which it also is using as a base for consulting with consumers and small- and medium-sized businesses.

“In international markets, we just don’t have the brand presence, the brand awareness or the distribution capability that we have with our stores,” Waitt told Bloomberg News.

Gateway also is cutting back on the possible configurations of its machines, from the hundreds to the dozens.

“We continue to simplify our product line and focus on the most popular set of recommended configurations,” Shaw said.

The company will pull back from battling Dell and Compaq Computer Corp. for larger corporate customers and will increase the amount of manufacturing that it contracts to others, Waitt said.

Gateway last month said it expected to break even in the second half of this year, reducing a February forecast that it would return to profitability. The company’s shares fell 25% the following day.

Analysts polled by Thomson Financial/First Call now expect a loss of 1 cent a share this quarter and profit of 3 cents in the fourth quarter.

“Gateway does not have low-cost production efficiencies in many ways,” said James Waggoner, director of research for Sands Bros. & Co. The anticipated overseas cuts are “a sign of the pressure that Dell and other manufacturers have put on Gateway.”

The company has lost $630 million over the most recent three quarters and now has about $1 billion in cash.

Gateway shares dipped 11 cents to $11.09 on Wednesday on the New York Stock Exchange and have lost 38% of their value since the beginning of the year.

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Bloomberg News was used in compiling this report.