Hot off the Press - News
April 3rd, 2004

Gateway Closes All Retail Stores and more.

In a week of sweeping changes wrought by its recent acquisition of PC manufacturer eMachines, Gateway Inc. has announced it is closing all of its troubled retail stores and that its consumer marketing chief, T. Scott Edwards, will leave the company.

The moves close 188 stores, slash 2,500 jobs -- 40% of the company's workforce -- and give Mr. Edwards two to four weeks to wrap up his affairs at Gateway, where he was executive vice president of the consumer. In an interview with Mr. Edwards said he does not have a new job.

Interim marketing duties will be handled by Brad Shaw, senior vice president of marketing, according to the company. "Brad will be assuming the duties provisionally. It still hasn't been decided whether he will retain that role or if we will recruit from the outside," a spokesman said.

Gateway, headquartered in a suburb of San Diego, acquired eMachines Inc. of Irvine, Calif., in early March in a deal reported to be worth $290 million. The CEO of eMachines, Wayne Inouye, was subsequently named the new CEO of




spacerGateway, a position formerly held by Gateway founder Ted Waitt. Seven members of a newly formed 13-member executive team are former eMachines executives.

Mr. Edwards was one of five top executive management team members listed by Gateway as it entered into the merger; only Mr. Waitt and Chief Financial Officer Rod Sherwood will remain, according to the company. Gateway will also move its headquarters from San Diego to be closer to eMachine's home in Orange County.

Gateway sold 2 million PCs last year and lags behind dominant leaders Hewlett-Packard and Dell, which each sold around 10 million machines. Since November 2002, Gateway has tried to move beyond PC sales, broadening its product line to include almost two dozen consumer electronic categories such as TVs, digital cameras and DVD player/recorders.

The newly merged Gateway presents a unique marketing challenge. Gateway built its reputation as the friendly, folksy PC maker selling direct to consumers, while eMachines built its business by selling ultra-low-cost PCs through major retailers.

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