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Gateway to cut 850 more jobs

The planned layoffs of customer support and service workers mean the PC maker will eliminate at least 1,300 positions, amid a move to outsource some operations.

Gateway will cut at least 1,300 jobs as it tries to streamline its manufacturing, delivery and service operations, an effort first announced last week.

On Tuesday, the Poway, Calif., company notified about 850 customer service and technical support employees that it would be eliminating their positions in a reorganization of its manufacturing system.

The 850 job cuts are in addition to 450 layoffs announced last week, when Gateway made public a plan to close its PC manufacturing plant in Hampton, Va., and to outsource some PC manufacturing.

The additional layoffs involve 200 customer service employees in Kansas City, Mo., and North Sioux City, S.D. They will also affect 650 customer support and warranty service workers in its Sioux Falls, S.D., location, Gateway spokesman Bob Sherbin said.

The job cuts and plant closure are part of Gateway's efforts to control costs and return to profitability, while also working to broaden its appeal with new products.

But there may be more layoffs ahead from the PC maker, as it is not finished getting its new manufacturing and distribution model in place yet, according to Sherbin.

"We'd expect any decisions that need to be made will be made ahead of the holiday season--by mid-November," he said.

Ultimately, Gateway wants to transform itself into a consumer electronics business, its executives have said. That plan envisions the company as consumers' preferred purveyor of devices ranging from digital televisions to portable music players.

Gateway has said it will launch 50 new products to support that strategy.

But the shift hasn't been introduced without needing difficult measures. Since the beginning of the year, Gateway has announced about 3,200 job cuts, including the recent manufacturing-related reductions and 1,900 layoffs made in March.

The company recently closed two retail outlets in Montgomery and Hoover, Ala., bringing the total number of store closures since January to 82. The Alabama stores did not meet Gateway's performance expectations, according to Sherbin.

The company now has 190 stores, down from 272 at the end of 2002 and 326 stores at the retail chain's peak.

Gateway said last week that it will take a charge of between $120 million and $160 million over the next three quarters to cover the plant closure, the most recent job cuts and other changes. But it expects to save between $115 million and $130 million in operating costs per year as a result.