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Gateway has no plans to cut Asian staff
By Julian Matthews,
January 12, 2001

Earnings shortfall and market glut forces job cuts by US PC-maker, but Asian workforce will be spared.

KUALA LUMPUR - Gateway Inc's plans to cut 10 percent of its global workforce after an earnings shortfall will not affect its Asian workforce.

"There are no current plans for layoffs in the Asia-Pacific region," said Robert Sherbin, Gateway vice president of corporate communications (Asia Pacific), in an immediate e-mail response.


Sherbin also indicated Gateway's staff at its regional assembly plant based in Malacca, Malaysia will not be affected.

The world's second largest direct seller announced cuts on Thursday after fourth quarter losses of US$94.3 million, or 29 cents per share, on sales of US$2.37 billion, including a US$187 million charge.

Excluding the charge, Gateway would have earned $37.6 million, or 12 cents per share. The earnings fell way below analysts' expectations.

Gateway's chief executive Jeff Weitzen said, despite the shortfall, the company will still stick to its "beyond-the-box" initiatives aimed at raising revenue from training, add-ons, Internet access and other services in a move away from its core PC manufacturing business.

Chief financial officer John Todd said in a conference call that Asian revenue growth was down 25 percent. He also cited a problem with "product relevance" in Asia, where he said it will have to revamp its product line to accommodate a market preference for thin compact products, rather than "large, cumbersome desktop boxes."

The San Diego-based PC-maker is among various US hardware vendors stuck with inventory after softer than expected sales in the Christmas season.

Gateway will take a US$50 million pretax charge in the first quarter to account for the global workforce reductions which will take place over the next six weeks. It also slashed projected earnings per-share this year to US$1.44. Revenue for 2001 is expected to grow 3 percent over last year with better sales projected in the latter half.

Sherbin said Gateway employs about 1,700 staff in Hong Kong, Malaysia, Singapore, Japan, Australia, New Zealand, Japan and Korea, with about 35 retail shops and some 90 store-in-store outlets.

In 1999, Asia Pacific sales accounted for 8 percent of total worldwide revenue with Japan as its single largest market. Gateway's 180,000-square-foot plant in Malacca, set up in 1995, has a capacity to assemble 50,000 systems-a-month and produced its one-millionth PC in July last year.

Gateway's shares had closed at US$22.90 up US$2.96, or 15 percent, at market close yesterday, well off its 52-week high of US$75.