Gateway plans additional layoffs in 2004

Gateway Inc. plans to cut approximately 1,000 employees from its workforce over the next few months, said Chief Financial Officer Rod Sherwood during a Morgan Stanley Dean Witter & Co. conference in California Monday.

The Poway, California, company currently has 6,500 employees, said Bob Sherbin, a Gateway spokesman. Over the next few months the company plans to bring that number down to somewhere in the "mid-5,000s" range, Sherwood said.

The cuts involve some additional positions as well as ones that have already been announced as part of a broad restructuring plan revealed last September, Sherbin said. Gateway ended 2003 with 7,500 employees, down sharply from the 11,000 employees remaining at the end of 2002.

In September, Gateway said the cuts related to some manufacturing activities would leave Gateway's workforce with 7,200 employees when completed, implying that some of those cuts took place in early 2004. The 2004 cuts affect a wide variety of departments, Sherbin said.

Gateway has shed jobs over the last year in hopes of getting out from under several consecutive unprofitable quarters. The company's plan to change its image from a PC company to a consumer electronics vendor has paid off in healthy sales of digital televisions and other consumer gear, but has devastated its PC business that still represents the bulk of its revenue.

In part to restore some of that PC revenue, Gateway announced it would purchase eMachines Inc. at the end of January. That deal is expected to close early next week, Sherwood said Monday.

The layoffs taking place over the rest of the year are not related to the eMachines acquisition, Sherbin said. It's too early to know whether there will be additional layoffs related to that deal, he said.

"This is part of our effort to get this company back to sustained profitability," Sherbin said.