February 9, 2006 6:06 AM PST

Gateway CEO Inouye resigns

A correction was made to this story. Read below for details.
update Wayne Inouye, CEO of Gateway since its merger with eMachines two years ago, has resigned as the company focuses on building up its direct sales to consumers and to professional markets.

Rick Snyder, Gateway's board chairman and a former company president, will serve as CEO until a permanent replacement is found, the company announced Thursday.

The sudden resignation of Inouye, to pursue other interests, comes in the midst of a rebound for the company. In 2005, Gateway saw its market share in the U.S. rise to 6.1 percent, making the company the third-biggest PC maker in the country. Shipments in 2005 grew by 33 percent, one of the fastest rates in the United States (where Gateway sells the vast majority of its PCs).

The problem is that the gains have mostly come through selling low-price retail machines, and Gateway wants to expand its government and business sales.

Wayne Inouye Wayne Inouye

Inouye, who became Gateway CEO after the March 2004 acquisition of budget PC maker eMachines, also stepped down as a Gateway director. He will, however, serve as a company adviser during the transition.

"Under Wayne, our retail business has done well and will continue to do well, and we're proud of that fact. We also got the company back to a break-even point," Snyder said during a conference call with analysts. "We're excited to continue to build the team and resources to take us to the next level with our professional and direct businesses."

Inouye, who came to Gateway as CEO of eMachines, successfully pushed the computer maker into the retail market. As a former executive of electronics retailing giant Best Buy, Inouye was able to get eMachines and Gateway computers onto store shelves of major retailers, expanding the company's presence beyond its direct-sales roots.

Gateway's board recently approved its 2006 annual operating plan that Inouye had submitted, and it will remain intact, Snyder said. He noted, however, that the company is particularly interested in finding ways to improve its performance in direct sales to its consumer and professional markets.

"On the direct and professional side, the financial results speak for themselves. Our direct business was not growing and flourishing," Snyder said. "We want people to look at Gateway, especially on the high end, as a value, and also bring back services and support."

Rick Snyder Rick Snyder

In the fourth quarter, Gateway reported a mixed financial performance.

The company sold nearly 1.36 million PCs during the three-month period, up 13 percent from the year-earlier period. The gains, in part due to its retail performance, made Gateway the second-fastest-growing PC company in the U.S. year over year, according to IDC.

But revenue from its direct-sales efforts fell 39 percent in the fourth quarter, to $115 million, compared with a year earlier. That was attributed to failed marketing efforts to drive sales and the discontinuance of consumer electronics.

Professional sales declined 9 percent in the quarter to $217 million, compared with a year earlier, due to lower unit sales and declining average unit prices.

During its more successful periods with its direct sales, Gateway also offered educational training in PCs to consumers, and to small and midsize businesses, he said.

Gateway will also look to bring the "sparkle and excitement" back to its product line and services, Snyder added.

Ted Waitt's vision
The company's charismatic founder and largest individual shareholder, Ted Waitt, may be called upon for his ideas but will not be asked to rejoin the company.

"Ted is basically retired from the company. And as the founder of the company, we will treat him with respect," Snyder said. "We may tap him for his vision...and hope he would be excited about helping."

Under Waitt, the company entered the consumer electronics market with its plasma TVs and digital cameras, as well as developed a network of retail Gateway Country stores. The company, however, has since exited those areas.

"There is no intention to expand back into the consumer electronics (business) and get back into

 

Correction: This story incorrectly described the trend in Gateway's market share. In 2005, the PC maker's market share rose to 6.1 percent.

CONTINUED: Faltering stock price…
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11 comments

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Gateway
Another rat leaving a sinking ship

Gateway will cease to exist very soon
Next one to go is SGI

<a class="jive-link-external" href="http://www.otherthingsnow.blogspot.com/" target="_newWindow">http://www.otherthingsnow.blogspot.com/</a>
Posted by SqlserverCode (165 comments )
Reply Link Flag
Severance?
Why is it that companies and their board of directors feel compelled to offer compensation to CEOs that is just beyond reason.

Nothing is performance based, and to offer a severance to someone who is leaving due to resignation just boggles the mind. Gateway probably doesn't offer their employees such great deals of a year's salary/wages if they quit to pursue other interests.
Posted by fjb3341 (2 comments )
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Executive Contracts
I think if you read between the lines he was probably terminated but worked it out to "resign" so he doesn't look bad to future employers. Most big time execs have contracts in place that pay them all of the money owed to them unless they do something very very bad (ie: Enron, Worldcom, Tyco). I don't agree with paying an outgoing exec, but I know if I were offered $750K to walk away I probably would take it.
Posted by jhawk73 (1 comment )
Link Flag
Do something different than Dell
To get a part of that consumer market share that Dell has, Gateway needs to give consumers/businesses something that Dell doesn't. "Sparkle" when it comes to computers and laptops means coming loaded with software/hardware that people want and nobody else has. Particularly the business market - their needs today center around securing stored and in transit information.

Such as a package that follows guidelines for firms interested in implementing an overall security plan: <a class="jive-link-external" href="http://www.essentialsecurity.com/Documents/article7.htm" target="_newWindow">http://www.essentialsecurity.com/Documents/article7.htm</a>
Posted by 209979377489953107664053243186 (71 comments )
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For Gateway to become profitable again...
Gateway needs to kill the retail outlets, move back to the midwest where property is cheap, sell directly to consumers, and open up a large factory putting together computers from high quality "off-the-shelf" parts that any decent computer tech could replace or upgrade.

This is the same formula that is making smaller businesses (e.g. Alienware, Falcon Northwest, Totally Awesome Computers) thrive in an environment where Dell dominates. Furthermore, Gateway could take advantage of the principle of "economies of scale," (in a way that isn't available to the smaller competitors) where they could achieve price points and mass production that would nearly rival Dell's price points and production capacity. At the same time, they could offer quality that Dell hasn't even approached since 2001 by giving a product that knowledgeable consumers would love to have because of the quality available in standard parts combined with the modular upgradeability of the parts (without having to dish out two to three times the going market rate for proprietary parts--one of my pet peaves with Dell computers).
Posted by Shoa_Creek (79 comments )
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re:
I thought Gateway closed all of its retail stores when they bough eMachines?
Posted by darrius3365 (98 comments )
Link Flag
There are no more stores
Gateway closed all of its stores in November of 2003 (I believe).
Posted by ebrandel (102 comments )
Link Flag
Gateway was founded on....
Gateway was founded on "You have a friend in the business," and that a normal person was helping another into the PC world.

I have been a Gateway customer since the late '80's - early '90's. All of the PC's I actually own are Gateway PCs.

Yes Gateway has some issues that have put a dent in the investor / return realm, but none of the issues are insurmountable. In fact if they get back to basics they could actually take on Dell.

Ted bailed due to investor pressure. They (the investors) wanted to dictate rather than rely on the fundamental principals of the company that Ted founded - in his garage.

Once upon a time I even got to speak directly to Ted about an issue that I was having with a PC that was purchased from him. The issue was resolved in 48 hrs via express shipment. Try that nowadays.

My point is that Gateway was founded on personal engagement and caring with the customer - - now severely lacking in the PC equipment world.

If I were CEO of Gateway, I'd have a published email / phone number to talk to my customers directly..... like Ted did in the very early days.... That would save Gateway.
Posted by Inetsec (40 comments )
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Noone is better than Dell (at least in Puerto Rico)
Unfortunately time have change and we have a new market leader,DELL. Try to get support from Gateway, HP or Compaq in Puerto Rico. I dont get to talk to the president of Dell but I can sure get support.

Even today, after reading the news, I chat with a customer representative from Gateway and asked them about what kind of support will I get If I buy a computer from them. They told me , they no longer provide support to PR. That I have to get it from local seller(like Walmart is going to give me any support).

The other day, I needed a replacement installation CD for a Compaq machine. I called tech support and they told me , "sure is only $25.00" , I told them that was great. When I was ready to pay I gave them my address in PR, and they told me they could not ship it to PR. I asked them why not? And they just said that I needed to talk to another support section. After talking to 3 different support sections. I got 2 phone numbers. One of them did not worked and the other only support HP and only for companies and not individuals.

I am a computer consultants and have been in the business all my life( since 7 grade). It is discusting how companies like Gateway and specially HP-Compaq want to sell their products with no support.

To all my customers I only recommend the best,DELL. When I see some fool buying a machine at Compusa,Walmart or Cotsco; I tell them one of my many stories about how bad they are and they quickly leave the machine and call DELL.

If you are a company and give no customer support, expect your bottom line to go to hell and I will make sure to let anyone I know about it.
Posted by yacahuma (530 comments )
Reply Link Flag
Dell Bah
Dell may support their machines, but they break at alarming frequency. I've had 6 Dell PC's in the last 6 years. 4 desktops, 2 portables. 5 broke after warranty period over. 3 erased the Hard drives, with backup drives - completely unrecoverable!!!
I will never, ever buy another Dell.
Ps I still have 2 older machines, 1 no name and 1 Hp which are 8 and 10 years old, and still work.
Posted by laleske (2 comments )
Link Flag
Gateway- Corp Mgrs arrogant, rude, dismissive.
I used to think Gateway had it together, made good, reliable PCs, then I bought a dual core PC. Nothing but problems, endless problems. The PC was sent back to Gateway, they "repaired" it, now it demonstrably works worse. They replaced virtually EVERY part other than the power supply - and they clearly did the repairs incorrectly - and that is according to Gateway's own senior tech persons. I then spoke with a corp. mgr. I was utterly shocked at how indifferent, arrogant and rude this mgr was...by contrast, Gateway's tech support is superb. Every tech person I spoke with - and there were many over a 9 month period, was helpful, knowledgeable, friendly and did their best to help.

This manager I dealt with is hopefully not representative of Gateway, for if he is, that strongly indicates they hire and keeps people in management who openly treat consumers as if their problems are irrelevant and they clearly don't feel any obligation to go the distance to help a customer.

This is a prime example of blind corporate indifference. Their product line has seriously slipped into being below the quality of a 5 yr old E-machine.

The way I have been treated by Gateway corp management is astonishingly bad business.
Posted by GaryBB (6 comments )
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