Gateway quits OfficeMax

Pulls out of 1,000 stores

Gateway is to quit selling its PCs in OfficeMax shops in the US.

The US PC manufacturer said it would withdraw from around 1,000 OfficeMax shops, the third biggest office supply retailer in the US. It currently has "stores-within-a-store" in around 500 of these shops, where it employs its own staff and has a separate space to flog its own goods. It sells its PCs via online kiosks in the other 500.

Gateway set up shop with Ohio-based OfficeMax last year, before the current general PC demand slump.

OfficeMax told CNet on Friday that several unidentified computer manufacturers had approached it in the hope of being Gateway's replacement, and added that Gateway would have to foot the bill for pulling out of the stores.

The PC giant revealed the decision during a conference call after it posted its Q1 results last week. Like its rivals, Gateway had a tough quarter - it sold 1.1 million units worldwide, 12 per cent less than Q1 the previous year.

Sales dropped 15 per cent to $2.03 billion, and the company made a net loss of $503 million - compared to a net profit of $120 million. The loss included $533 million in restructure charges, and $24 million costs from a new accounting system.

Gateway said its US consumer unit saw sales drop 19 per cent year on year, while sales in its US business division grew six per cent.

In January the company said it would lay off 3,000 of its 24,000 staff and close 27 shops, leaving it with just under 300 retail outlets. At the time it also revealed it would take a charge of between $150 million and $275 million.

It has also said it will close all ten stores in Canada, and plans to shut down its US ISP, Gateway.net, in July.

Like much of the industry, Gateway is being forced to make cutbacks until the market picks up again - Hewlett-Packard and Compaq have both announced staff layoffs (3,000 and 5,000 respectively) in the last few weeks. ®

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