Layoffs to follow Gateway's 1st-quarter loss

Layoffs to follow Gateway's 1st-quarter loss
By John G. Spooner
Staff Writer, CNET News.com

Gateway on Thursday reported a larger first-quarter loss than expected,
citing restructuring charges, and announced plans to lay off 1,500 more
employees by the end of the year, reducing its employee headcount to about
2,000.

The news of the layoffs came as the PC maker, which acquired fellow
manufacturer eMachines in March in an effort to boost PC shipments, reported
a preliminary loss of $166 million, 49 cents per share, on revenue of $868
million for the first quarter, which ended March 31.

The loss included a charge of $104 million, or 31 cents per share, related
to the closing of its chain of 188 retail outlets, which resulted in 2,500
layoffs. Without the charge and a $13 million tax benefit, Gateway would
have posted a $75 million loss--22 cents per share--for the quarter, the
company said.

On average, 10 analysts surveyed by Thompson FirstCall had expected Gateway
to report a loss of 20 cents per share. Revenue estimates of eight analysts
polled by the firm averaged $795 million.

During the same quarter one year ago, Gateway reported a $200 million loss,
equaling 62 cents per share, on revenue of $844 million.

Gateway will use the layoffs and other cost-reduction efforts, such as
streamlining some of its product lines, as a way to speed its path to
profitability. It plans to return to profitability by 2005, it said in its
earnings statement.

Gateway will also seek to lower its selling, general and administrative
costs, which are mostly made up of salaries, to less than 10 percent of
revenue, it said.

Going forward, Gateway said it expects second-quarter revenue of $798
million and a loss of 15 cents per share before charges.