Late Thursday, Gateway ( GTW) announced yet another massive layoff amid an ongoing, painful restructuring at the company. After the latest downsizing is completed by the end of this year, the company's staff will shrink by nearly three quarters from the close of 2003. The company also said its first-quarter sales bested Wall Street expectations, although its loss was slightly worse than expected. After hours, Gateway stock was recently down 14 cents, or 2.6%, to $4.67. In regular trading, the stock lost 14 cents or 2.6% to close at $5.31. The PC and consumer gadgets maker said after the close that it plans to shrink its staff to only 2,000 people by the end of 2004, down from a staff of around 7,400 at the close of 2003. The company has already roughly halved its work force just this year. Following the closure of 188 retail stores earlier this month, the company was left with a staff of 3,500 people. Reflecting the desperate straits that have prompted the massive downsizing, Gateway said after the bell that first-quarter sales rose a mere 2.8% from last year to $868 million, at a time many of its larger competitors have seen double-digit growth. Gateway's revenue did come in well above the consensus estimate for $797.9 million, however. The company narrowed its loss slightly to $165 million, compared to a loss of $200 million a year ago. It lost 49 cents per share according to generally accepted accounting principles. The GAAP figure reflects restructuring and transformation expenses of $104 million, or 31 cents a share, and a tax benefit of $13 million, or 4 cents a share. Excluding one-time charges and benefits, Gateway would have seen a per-share loss of 22 cents, slightly worse than the consensus estimate for 20 cents.
The first-quarter results include the operations of eMachines dating from March 12, when it was acquired by Gateway. Gateway endorsed analyst estimates for the second quarter, which called for sales of $798.3 million and a loss per share of 15 cents, excluding restructuring charges. It reiterated a goal to be profitable for 2005. Following its purchase of computer maker eMachines earlier this year, Gateway has seen sweeping changes with eMachines management moving in to replace many of the Gateway old guard. Most notably, former eMachines CEO Wayne Inouye shouldered out Gateway founder Ted Waitt to become the new leader of the company. In another major announcement, on
April 1 Gateway announced it would shutter all its retail stores and push to sell more of its products through third-party stores, while continuing to let customers buy online or by phone. "We are in the midst of a far-reaching effort to simplify our business and fundamentally change our cost structure as we push toward a return to sustained profitability," Gateway's CEO Wayne Inouye said in a prepared statement accompanying today's earnings release. He said the company will focus on strengthening its phone and web sales channels.