Gateway threatens to pull plug on non-US markets

By PETER GRIFFIN technology writer

A future Australasian presence for struggling US computer manufacturer Gateway looks uncertain as the company embarks on restructuring that could lead to its withdrawal from all overseas markets.

This week Gateway, which employs 20 staff locally, revealed plans to close its Irish and British operations - including retail stores throughout Europe and a major Dublin-based facility - with the loss of more than 1000 jobs.

Facing the toughest market conditions in years and struggling to match stiff competition from Dell and Compaq on its home front, the company may also close operations in the Asia Pacific region.

"It could mean significant restructuring or even our withdrawal from that market," a Gateway spokesman said.

The European closures follow dismal second-quarter results for Gateway in the Asia region, where sales plummeted 52 per cent to $US110.3 million ($261 million).

No Gateway computers are manufactured in New Zealand and Australia, where the company's workforce comprises mainly retail staff. Instead, Gateway Machines are imported pre-assembled from plants in Malaysia.

In New Zealand, the company has three stores - in Auckland, Wellington and Christchurch - and a distribution centre in Albany, acquired in 1998 when Gateway picked up home-grown PC assembler PC Direct for $7 million.

While that purchase gave Gateway access to a well-established customer base, the stripped-down local operation failed to capitalise on it.

Last year, Gateway struck a deal with retailing giant The Warehouse to sell its computers through Warehouse Stationery stores across the country.

Warehouse Stationery general manager Rob Smith said the company would have discussions next week with Gateway about the implications of restructuring.

He described the partnership to date as "successful". But figures from analyst group IDC put Gateway trailing in tenth place in the local market, behind large multinationals such as Compaq and Hewlett Packard and local assemblers like the PC Company.

That means Gateway has just 2 to 3 per cent of the PC market.

"They're reasonably strong in the consumer space but overall in the market, they're what we'd call a second-tier player," said IDC market analyst Darian Bird.

A clear picture of how extensive Gateway's retreat will be is still a few weeks off, because European labour laws require a company to consult its employees before shutting a plant down.