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Gateway on the Clock

An investor group gives the PC maker until the end of the month to change its ways.

A consortium of investors have thrown the gauntlet at



, asking for three seats on the PC maker's board in order to get the company back on track.

In a letter to Gateway's top brass sent Wednesday, Firebrand Partners and Harbinger Capital Partners -- which together own 10.7% of the company's shares -- made clear their intention to take an active role in the company.

Saying there is a dramatic but "perishable" opportunity to increase shareholder value, the investors gave Gateway until the end of the month to indicate its willingness to enact a series of actions. Among those actions: abolishing Gateway's anti-takeover measures and appointing three Firebrand designees to the Gateway board of directors.

"A company with a great brand and channel strength, but 5.5% gross margins, requires a Board whose oversight and experience can aid in the development and articulation of a strategy to improve margins," read the letter signed by Firebrand Partners managing member Scott Galloway.

Gateway said the corporate governance and nominating committee of its board of directors is reviewing the request and will make a recommendation to the full board following the review.

Shares of Gateway were unchanged in midday trading at $1.72.

Irvine, Calif.-based Gateway is the No. 3 PC maker in the U.S., but the company has struggled to achieve the right mix of revenue and profit growth.

According to a report by Gartner, Gateway's PC shipments in the third quarter decreased about 1% year over year. Only


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had a larger decline, while

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all posted solid gains during the period.

In September, Gateway

appointed Ed Coleman as its new CEO, seven months after his predecessor unexpectedly resigned. The sluggish pace in filling the CEO post was viewed by some investors as a sign of the company's lack of urgency, a charge that was echoed by the investors in Wednesday's letter.

"We believe that continued inertia at the board level is unacceptable. If, working together, we cannot leverage these assets, then they should be put in the hands of an organization that can (i.e., the Company should be sold)," the letter stated.

The investors initially disclosed their stake in Gateway in August. Shortly after that, Lap Shun "John" Hui, the founder of eMachines, indicated his

interest in purchasing Gateway's retail PC operations for $450 million -- an offer Gateway rejected.

In Wednesday's letter, the group of investors signaled their intention to wage a proxy fight if Gateway does not accede to their demands.

The investors did not specify who they had in mind for the three seats on Gateway's board, but said that the trio would "bring much needed domain expertise in brand and design to the boardroom that can immediately aid management's efforts to create customer differentiation and improve margins."