Gateway to close all retail stores

Gateway Inc. plans to close its entire network of 188 retail stores next week and lay off about 2,500 staff, the PC maker announced Thursday.

The stores will be closed April 9, Gateway said in a statement. It will continue to sell products directly to customers over the Web and by phone, and will seek to expand its presence in other retail outlets, the company said.

The move comes less than a month after Gateway completed its acquisition of PC vendor eMachines Inc. and installed a new chief executive officer, Wayne Inouye, who previously was eMachines' CEO.

Part of Gateway's motivation for buying eMachines was to have access to its retail channels, which include most of the big electronics stores in the U.S., said Rob Enderle, principal analyst with The Enderle Group. Those electronics stores provide a better outlet for Gateway to sell its products, particularly as it tries to expand beyond PCs and into consumer fare such as flat-screen TVs, he said.

Maintaining its own network of stores would have put Gateway into conflict with the other retail outlets, so a decision to close its own properties was an obvious one to make, Enderle said.

"Gateway made a strategic decision: Either the (Gateway) stores had to go, or the retail channel had to go," he said.

Gateway will offer more details about its branding and channel strategy, and discuss any cost implications of the closures, when it announces its first-quarter financial results on April 29, the Poway, California-based company said. It did not return calls seeking further comment Thursday.

Ted Waitt, Gateway's outgoing CEO, remains its chairman and its largest stockholder.

The company's revenue took a dramatic dive in the fourth quarter, ended Dec. 31, as its PC business slowed and it worked to reinvent itself as a provider of more general electronics gear. Revenue for the period dropped to US$875 million, from $1.1 billion a year earlier, the company said in January.

Gateway's purchase of eMachines, in Irvine, California, was valued at more than $234 million in cash and stock when the deal was announced early this year. With the buy, Gateway said its hopes to become the third-largest PC company in the U.S. and the eighth-largest PC vendor in the world.

Ahead of the news, Gateway's shares (GTW) on the New York Stock Exchange closed at $5.40 Thursday, up $0.12 on the day. In after-hours trading the shares inched higher, to $5.50 at the time of this report.

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