Gateway to close all retail stores

Gateway will close its entire network of 188 retail stores next week and lay off about 2,500 staff.

Gateway will close its entire network of 188 retail stores next week and lay off about 2,500 staff.

The stores will be closed on 9 April, however, it will continue to sell products directly to customers over the web and by phone, and will seek to expand to other retail outlets.

The move comes less than a month after Gateway completed its acquisition of PC supplier eMachines and recruited a new chief executive officer, Wayne Inouye.

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 US, 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 goods such as flat-screen TVs.

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 29 April, the company said.

Ted Waitt, Gateway's chief executive officer will remains its chairman and its largest stockholder.

The company's revenue took a dramatic dive in the fourth quarter, which ended 31 December, 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 $875m (£472m), from $1.1bn a year earlier.

Gateway's purchase of eMachines was valued at more than $234m in cash and stock when the deal was announced earlier this year.  Gateway said it hoped to become the third-largest PC company in the US and the eighth-largest PC supplier in the world.

James Niccolai writes for IDG News Service

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