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Desktops

Gateway to trim work force

The PC maker will announce layoffs later in the day, as part of a previously announced plan aimed at returning the company to profitability, CNET News.com has learned.

Gateway will announce layoffs Monday, as part of a previously announced plan aimed at returning the company to profitability, CNET News.com has learned.

The Poway, Calif., PC maker began notifying employees affected by the job cuts Monday morning. Gateway plans to announce the number of job cuts as soon as later in the day, a company spokesman said.

Rod Sherwood, Gateway's chief financial officer, said at a conference earlier this month that the company's goal is to boost revenue by growing its PC business and entering new markets for consumer electronics, while lowering general and administrative expenses--generally the bulk of which are salaries and company operations such as human resources--as well as reducing manufacturing costs such as product warranties.

Under the plan, Gateway would consider layoffs and closing Gateway stores, Sherwood said at the time, but he declined to offer details. The end result would lower Gateway's break-even point, allowing the company to return to profitability more easily and quickly. Gateway began working on the plan in late 2002.

Everything from job cuts to closing store locations was on the table, the company spokesman confirmed Monday. "We have made a series of decisions," he added.

Those decisions, which most likely will include a combination of store closings and job cuts, will be made public during the announcement, he said.

Analysts say Gateway needs to adopt a new, more cost-conscious strategy to return to profitability.

"I agree with (Sherwood's) strategy to close more stores and continue to run the stores that are profitable with high foot traffic," said Brooks Gray, an analyst with Technology Business Research. "Closing down the Hampton, Va., (PC manufacturing) facility, which I believe to be extraordinarily underutilized would be my second move."

But to Gateway's credit, "I'm seeing quick, decisive action being taken by the management, right now," Gray said. "More than ever, I feel that the management team is taking action to hasten the path to profitability."

The Gateway spokesman declined to comment immediately because the company is still in the process of notifying affected employees. "Right now our main concern is notifying our employees in a way that's respectful," he said. "It has been a tough day for everybody" at Gateway.

Gateway has already closed four stores this year, bringing its total to 268 stores. At one time, Gateway had 326 stores.