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Gateway mulls new California headquarters

The computing company is looking to relocate its main office to southern Orange County, as it meshes its employees and culture with those of the newly acquired eMachines.

Gateway announced plans to relocate its headquarters to southern Orange County, as analysts focused on another real-estate question: What will happen to the PC maker's retail stores?

The company is looking at sites in the California county, it confirmed on Wednesday, as part of efforts to combine workers from its current headquarters in the San Diego area with employees from the main offices of eMachines. Gateway acquired low-cost retail PC leader eMachines in March.

"It's clear we needed a new head office, because neither of the current ones would be enough to accommodate the large staff and have room for growth," Gateway spokesman Bob Sherbin said.

The company has yet to sign a contract on a site, but is looking at one in Irvine, Calif., where eMachines is based. The move is not expected to be completed before July, Sherbin said.

Gateway will offer severance packages to employees who do not want to relocate, Sherbin said, but did not comment on how many workers might be affected.

Last week, Gateway announced its postmerger management structure is split fairly evenly between former executives of eMachines and Gateway. Seven of its 13 new senior vice presidents are former eMachines executives. The rest are from Gateway.

In buying eMachines, Gateway picked up new product distribution channels, including third-party retail stores in the United Kingdom and Japan, as well as in the United States. eMachines, which sells through retail channels, has staked out a significant share of the PC market.

Gateway established itself by selling PCs directly to consumers, but in recent years has moved toward setting up its own retail stores. In addition, it has expanded its portfolio of products to include consumer electronics devices, such as plasma screen televisions and digital audio players. However, Gateway has struggled with its retail efforts, leading analysts to wonder about its fate.

Most analysts believe Gateway will eventually shutter most, if not all, of its retail stores to cut costs. Such a move could also help persuade retailers that are currently its rivals to carry Gateway-branded PCs and consumer electronics devices.

"Gateway is going to have to test the waters and see how well its (consumer electronics) products are accepted by the retailers," said Toni Duboise, a desktop PC analyst at ARS.

CNET News.com's John Spooner contributed to this story.