NZ operation shut as Gateway retrenches

By NICK STANLEY and AGENCIES

Personal computer maker Gateway is closing its New Zealand operation as it cuts about 25 per cent of its worldwide work force.

Staff arriving at the Gateway retail store in Auckland this morning found the doors locked and protected by security guards.

Gateway said in a statement today that their 19 New Zealand employees had been called to a staff meetings today and told they would laid off within the next few days.

The company's workforce in this country comprises mainly retail staff at its three stores - in Auckland, Wellington and Christchurch - and distribution centre in Albany.

Gateway computers are imported pre-assembled from manufacturing plants in Malaysia.

The company said all customers who ordered a computer in the last 14 days would be eligible for a full refund and would be contacted to see if they wanted to proceed with their order.

"Support, warranty and parts services will continue, so existing customer support will be maintained. Customer support services will continue without interruption through existing third party service providers already providing Gateway customer support in Australia and New Zealand."

A message on Gateway's website today said: "Gateway regrets to inform all our customers that it will no longer actively sell it's products in Australia and New Zealand; or from this ANZ website. Our site has been a popular one and will remain available to our existing customers to assist them with their support queries."

Gateway bought New Zealand PC assembler PC Direct in 1998 for $7 million and while the 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.

However, the company has been affected by a global price war, led by rival Dell, as the downturn in PC sales hit the computer market.

In addition to its New Zealand closure, Gateway is closing its Australian operation, at the cost of 200 jobs, and other operations in Japan, Malaysia and Singapore.

Gateway is also cutting about 15 per cent of its US work force and looking at a possible exit from Europe.

The company said it expected its restructuring moves to save it about $US300 million ($682 million) in costs and expenses annually.

However, an analyst with US Bancorp Piper Jaffray, Ashok Kumar, said even after the current restructuring Gateway's cost structure was completely out of alignment.

"Operating expenses have grown 25 per cent per year since 1996, compared to revenue growth of 17 per cent. And with about 300 stores still functioning, the company still carries overhead to the tune of $US300 million."

The number four 4 PC maker, known for its cow-pattern boxes, said it was organising itself along six lines of business - hardware, communications, applications, learning, financing, and services.