By BBC News Online's North America
business reporter, David Schepp
In wake of the announcement by Gateway that it intends to cut thousands of jobs, naysayers are swirling like vultures, offering gloomy opinions of what may happen to the once thriving computer maker - call it corporate cow-tipping.
On Tuesday, the company, which markets its computers in boxes spotted like the hides of Friesian cows, said it would cut a quarter of its workforce and shutter operations in the Pacific Rim and Europe, resulting in a $475m (£327.2m) charge against profits in the coming quarter.
Gateway, which has been hit hard by the recent personal-computer (PC) price wars, said the layoffs were part of its ongoing restructuring programme it began last month. But analysts are not nearly so sanguine, saying the company is in a world of hurt.
"Broken company"
"They are a broken company," says Eric Rothdeutsch, analyst with brokerage firm Robertson Stephens. "They have a lot of significant challenges ahead. So, the jury is going to be out for a while."
To be sure, what ails Gateway is hardly unique to the San Diego-based maker of personal computers.
The technology rout has taken its toll on nearly every computer maker, including mighty players such as Compaq, Dell and Hewlett-Packard.
Analysts are critical of the company's moves overseas to markets where its corny, middle-America image was neither known nor understood.
Investors also have reacted with near alarm over the direction of the company, especially Gateway's rising costs in recent years.
"Their cost structure is completely out of alignment and remains so even after this restructuring," says Ashok Kumar, an analyst with US Bancorp Piper Jaffray.
Mr Kumar added, however, the company was wise to exit its overseas markets because it was not successful in selling its image with consumers in Asia and Europe.
A wayward path
Analysts do not have to look too far for comparisons to Gateway's woes.
Fellow computer-maker Apple Computer was facing a dismal future when its founder Steve Jobs returned in 1997 to reinvigorate the company.
At the time, Apple critics complained the company had become complacent - even cocky - believing it was too unique to ever be forced from the marketplace.
That analysis could be applied to Gateway, too. From its down-home image to its one-of-a-kind sales approach (Gateway was among the first computer makers to sell its computers by phone), Gateway carved a unique niche in market with many players.
Gateway portrayed itself in ad campaigns as a family-friendly, small-town company - more akin to Wal-Mart than its Silicon Valley counterparts.
'More than a PC company'
But in the face of an economic slowdown, the company's business plan began to falter, forcing its founder, Ted Waitt, to return his chief executive position to shore up the company he founded in his father's Iowa barn in 1985.
After leaving the company several years ago, Mr Waitt, who in recent years found himself among the world's richest people in lists compiled by Fortune magazine, has been featured in television adverts, talking up the company's prospects and issuing a clarion call to his employees in the face of an economic slowdown.
Speaking on Tuesday, Mr Waitt emphasised the company's planned shift away from its core business, PC sales, to providing services to its customers.
"We're more than just a PC company. We are not just a PC company," he told reporters and analysts during a conference call following the announcement.
As part of the realignment announced on Tuesday, Gateway, the nation's fourth largest PC maker, said it would shutter call centres across the United States and shut its Salt Lake City, Utah, manufacturing facility.
Analysts see the closures as positive moves because they cut costs. But warn that Gateway needs to find ways to spur sales.
Analysts also warn they expect Gateway to
continue losing money. For the last three
quarters, the company has posted losses
instead of profits. More losses are expected in
the current quarter, which ends 30 September.
-- Anonymous, August 29, 2001