Gateway CEO Quits Abruptly Amid PC Slump
Gateway Inc. Chief Executive Jeff Weitzen, who expanded the company’s offerings beyond personal computers but failed to predict a recent slump in PC sales, stepped down unexpectedly Monday, less than three weeks after the company posted its first quarterly loss in more than three years.
Weitzen, 44, was replaced by Gateway founder and Chairman Ted Waitt, who will resume day-to-day leadership of the San Diego-based company after a year away.
Gateway declined to make either executive available for interviews and described Weitzen’s move as a retirement. Others said Weitzen was the highest-profile victim of the dramatic falloff in computer sales.
“It’s an indication of how challenging the PC industry has become,” said analyst Eric Rothdeutsch of Robertson, Stephens & Co.
Gateway spokesman John Spelich said Waitt, who owns nearly a third of Gateway, “decided to step up his involvement.” Waitt, 38, of La Jolla, spent most of the year since he stepped aside as CEO working with his family’s charitable foundation.
Spelich said it was too soon to say what strategic shifts were coming, but that “execution issues” would be a priority.
Gateway shares have fallen by nearly two-thirds in the last year and were hit harder than its rivals after it suddenly reversed optimistic projections for the fourth quarter last fall.
It then badly missed those lowered expectations as sales in the October-December period fell. The company’s share of PC sales fell to 8.1%, or 1.07 million units, from 9.3%, or 1.15 million units, a year earlier, according to preliminary estimates from Dataquest. On Jan. 11, Gateway said revenue for 2001 would rise just 3%.
The company also came under fire for poor investments in other companies, which led to a $200-million fourth-quarter charge. Among the investments that have declined in value are stakes in America Online Inc. (now AOL Time Warner Inc.), OfficeMax Inc. and Quepasa.com Inc., which said last month it would liquidate.
Spelich said the company hadn’t been looking for its investments to increase in value, but instead sank money into the companies to cement supplier or customer deals.
The $200-million charge more than wiped out a quarterly profit from operations of $37.6 million, or 12 cents a share, compared with a year-earlier profit of $126 million, or 38 cents. Sales fell 6.9%, to $2.37 billion.
Weitzen’s departure was announced after the close of the markets Monday.
Gateway shares gained as much as $1.84, to $23.50, in after-hours trading, after rising 89 cents to $21.66 in regular New York Stock Exchange trading.
Gateway recently announced plans to fire 10% of its workers and move some manufacturing to South Dakota, where the company was based in its early years.
Waitt dropped out of college to found Gateway, which rapidly gained share by targeting consumers with its black-and-white cow-themed boxes as larger direct PC sellers such as Dell Computer Corp. went after corporate buyers.
In the last two years, Gateway has sought more corporate business as Dell has gone after more consumers.
Gateway lost money on its core PC business in the fourth quarter. Before that, half of its profit was from services and non-PC products.
“It’s a proven strategy, from a financial-results point of view,” Spelich said.
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Bloomberg News and Reuters contributed to this report.
