188 Stores Closed, 2,500 Jobs Cut

GATEWAY CLOSES RETAIL STORES, OUSTS MARKETING CHIEF

T. Scott Edwards Leaving Company in Post-Merger Shakeup

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YORK, Pa. (AdAge.com) -- In a week of sweeping changes wrought by its recent acquisition of PC manufacturer eMachines, Gateway Inc. has announced it is closing all of its troubled
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retail stores and that its consumer marketing chief, T. Scott Edwards, will leave the company.

2,500 jobs
The moves close 188 stores, slash 2,500 jobs -- 40% of the company's workforce -- and give Mr. Edwards two to four weeks to wrap up his affairs at Gateway, where he was executive vice president of the consumer. In an interview with AdAge.com Mr. Edwards said he does not have a new job.

Interim marketing duties will be handled by Brad Shaw, senior vice president of marketing, according to the company. "Brad will be assuming the duties provisionally. It still hasn't been decided whether he will retain that role or if we will recruit from the outside," a spokesman said.

New CEO
Gateway, headquartered in a suburb of San Diego, acquired eMachines Inc. of Irvine, Calif., in early March in a deal reported to be worth $290 million. The CEO of eMachines, Wayne Inouye, was subsequently named the new CEO of Gateway, a position formerly held by Gateway founder Ted Waitt. Seven members of a newly formed 13-member executive team are former eMachines executives.

Mr. Edwards was one of five top executive management team members listed by Gateway as it entered into the merger; only Mr. Waitt and Chief Financial Officer Rod Sherwood will remain, according to the company. Gateway will also move its headquarters from San Diego to be closer to eMachine's home in Orange County.

Lagging sales
Gateway sold 2 million PCs last year and lags behind dominant leaders Hewlett-Packard and Dell, which each sold around 10 million machines. Since November 2002, Gateway has tried to move beyond PC sales, broadening its product line to include almost two dozen consumer electronic categories such as TVs, digital cameras and DVD player/recorders.

The newly merged Gateway presents a unique marketing challenge. Gateway built its reputation as the friendly, folksy PC maker selling direct to consumers, while eMachines built its business by selling ultra-low-cost PCs through major retailers.

No agency change
The departing Mr. Edwards was formerly a marketing senior vice president at Sony Electronics and before that a vice president at Publicis Groupe's Leo Burnett. He took the Gateway job in early 2003 and oversaw the $200 million-plus Gateway advertising review that was eventually won by Leo Burnett USA, Chicago, in March 2003. Burnett handles brand, direct and retail advertising, while sibling StarLink and Halogen handle media buying and direct media, respectively.

The Gateway spokesman said there is no change in agency status.

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