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Gateway makes plans to exit Britain, Ireland

The PC maker is evaluating whether to stay in any of its overseas markets and has already submitted a proposal to close its British and Irish operations.

As it continues to revamp its business, PC maker Gateway is evaluating whether to close all of its overseas units and has already submitted a proposal to close its British and Irish operations.

Gateway notified employees Wednesday that it is considering closing its manufacturing plant in Dublin as well as its sales, service and marketing operations throughout Britain and Ireland. Under British and Irish law, companies are required to consult with employee-elected representatives before making such a move, a process that could take 30 to 90 days.

Gateway has 1,085 workers in Britain and Ireland, or roughly 5 percent of the company's total work force of 20,000.

"It is just the start of the process," Gateway spokeswoman Donna Kather said. "Until we go through the process, no decisions are made."

Kather said the company is re-evaluating all of its operations outside the United States to see whether they can grow and be profitable under the company's new strategy, which focuses on selling PCs, software, accessories and training as a "solution" to consumers and small businesses.

"What we are currently doing is looking at our ability to do that on a market-by-market basis," Kather said. "If we decide upon further evaluation (that we can't reach those goals), it could mean a major restructuring or even a withdrawal from that market."

International sales--primarily from Europe and Asia--accounted for 12 percent of Gateway's $1.5 billion in net sales for the three months that ended in June, according to the company's latest quarterly filing with the Securities and Exchange Commission.

San Diego-based Gateway is also evaluating whether to outsource more of its manufacturing and close some of its plants, although Kather said no decisions have been made in that regard either.

Since the beginning of the year, Gateway has replaced its chief executive, overhauled its management team, announced massive job cuts and dramatically scaled back the number of configurations of PCs it sells.

The company has also announced plans to consolidate its business and consumer PC divisions, a move that has led to further job cuts in recent weeks, Kather said.

Eventually, Gateway plans to offer consumers only a few dozen models of PCs, down from the millions of configurations once available and the hundreds of systems the company currently offers. Kather said the company will continue to offer more options in the education and small-business markets.

Needham & Co. analyst Andrew Scott said he expects the company to pull out of Europe entirely, which should help the company's financial picture. Still, he added, the main issue for the company is how it handles its core U.S. business.

"The real question is: Will they be able to exploit the (U.S.) Gateway Country stores to (sell) higher-margin services to their customers? I think that is what investors should focus on," Scott said.

Kather said Gateway is not planning any more mass closures of its Gateway Country stores in the United States. Earlier this year, it shuttered about 10 percent of its U.S. stores.

"We still have right around 300 (U.S. stores). We think that is about the right number," Kather said. "Stores are key to our local-market strategy."

The company, which has also closed some overseas stores, may shutter more of its 56 remaining international shops if it decides to pull back or exit some overseas markets, Kather added.

"It would be part of that evaluation of each of those markets."

Goldman Sachs analyst Joe Moore said in a research note last week that he expects Gateway to pull back from overseas operations. Moore noted that the company's international units had generated operating losses for the past three fiscal years.

"It seems increasingly likely that the company could exit these international markets altogether," he said.