Gateway to Cut 450 Jobs, Close Va. Plant

The personal-computer maker will close a plant in Hampton, Va., by Sept. 30, eliminating 450 jobs. An undetermined number of jobs will be cut at plants in North Sioux City, S.D., where 2,500 people work, and in Sioux Falls, S.D., where 950 people work.

Gateway employs about 8,500 people overall.

The effort marks Gateway's latest effort to return to profits after more than two years of losses. The measures are expected to cut annual costs between $115 million and $130 million, in addition to $400 million in annual costs that Gateway pledged to cut in May.

Gateway, based in the San Diego suburb of Poway, said it would record charges between $120 million and $160 million for severance and related costs. The charges will be posted against earnings in the third and fourth quarters of this year and the first quarter of next year.

The operations makeover, expected to be completed by the middle of November, includes manufacturing, distribution, service and customer support, said Joe Formichelli, executive vice president of operations.

"We're looking at the total supply chain," he said. "All is being looked at seriously."

Gateway will reap immediate benefits by lowering costs but its business may eventually suffer by farming out more work, said Robert Cihra, an analyst at Fulcrum Global Partners in New York. One of Gateway's main strengths has been its ability to fill custom orders, and outside contractors tend to follow standard models, he said.

"The long-term worry is that it dilutes one of Gateway's few remaining assets," he said.

The company is morphing from a traditional PC maker to offer a broad array of consumer electronics, including flat-panel televisions, digital cameras and digital music players.

Since saying in May that it would launch more than 50 products, Gateway has brought more than 45 to market, Rod Sherwood, chief financial officer, told investors in New York. He said the company would launch 18 new products this week alone.

Gateway is outsourcing some work to several suppliers in the United States and abroad and will encompass PCs and consumer electronics.

The company declined to identify new suppliers, saying negotiations were unfinished. The Wall Street Journal reported it has been holding talks with outsourcers Celestica Inc., Solectron Corp. and Wistron Corp. to handle assembly, customer returns, repairs and spare parts for PC and consumer electronics products.

Gateway shares rose 2 cents to close at $6.10 on the New York Stock Exchange.