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Gateway to consolidate Midwestern facilities

PC maker closes up shop in Sioux Falls, S.D., as part of its plan for profitability.

Gateway will close its Sioux Falls, S.D., facility this month, as part of its plan to return to profitability.

The PC maker notified employees in Sioux Falls, one of its three locations in the Midwest, of the decision this morning. The closing will result in as many as 300 layoffs. Gateway will consolidate some operations at its nearby North Sioux City facility, and several dozen Sioux Falls workers may be offered the opportunity to relocate, a company representative said.

Shuttering the Sioux Falls facility is part of a previously announced Gateway initiative to return to profitability by the end of this year--meaning the company wants to be profitable in 2005 after reporting a string of quarterly losses.

The company acquired eMachines and appointed a new CEO, Wayne Inouye, in March. Since then, Gateway has closed its chain of retail stores and embarked on the profitability plan. As part of that initiative, Gateway expects to eliminate about 2,000 jobs from a headcount that was roughly 3,500 after the store closures. The company believes the measure will help reduce its sales, general and administrative costs--most of which typically consist of salaries--to 10 percent of revenue.

Meanwhile, the company has also been working to simplify its product lines and ink agreements with retail stores to place its PCs and consumer electronics products on their shelves. Doing so will help pump up sales, the company believes.

"This is part of our simplification and cost-cutting measures that are intended to get the company back to profitability," spokesman David Hallisey said. "It's a difficult but unavoidable step."

The PC maker evaluated all three of its Midwestern facilities, which also include the North Sioux City, S.D., location and one in Kansas City, Mo., before deciding to close Sioux Falls.

Gateway plans to move some operations from Sioux Falls to North Sioux City, which is about 80 miles away.

This is the second time layoffs have hit Gateway in South Dakota in as many years. Last year, Gateway cut about 850 jobs at the two facilities as part of a plan to streamline its PC manufacturing operation.

Those employees in Sioux Falls who lose their jobs or who choose not to relocate will receive a severance package that includes outplacement.

Ultimately, Gateway will consolidate its North American operations at three locations, including North Sioux City, Kansas City and a new headquarters in Irvine, Calif. It plans to move its headquarters from Poway, Calif., to Irvine, Calif., during the late summer.

No other closures are currently planned, Hallisey said.