MBO planned for Gateway UK and Ireland?

Plans for an MBO are afoot at Gateway's UK and Irish operations, we believe.

The US PC maker announced it was shutting down UK and Irish operations, with the loss of 1,200 jobs last week, but it seems the local management think there's life in the business. This is in spite of the collapse of European sales by 46 per cent in the second quarter of the year.

This is a disastrous loss of market share, considering that UK PC shipments fell only 8 per cent in the first half of the year and that European sales to consumers (Gateway's key market) have fallen 15 per cent. Worldwide the company lost $20.8m in Q2.

Gateway has confirmed its intention to cease manufacturing in Ireland and also to close down its European headquarters in Dublin. It is to repay in full IR£20m in grants made by the Irish government.

It seems unlikely that the MBO plans will include continuing with the manufacturing side of the business, which would be simpler to outsource. Gateway has demonstrated it hasn't built up the expertise to assemble and sell PCs profitably in the UK and Ireland.

Mike Maloney, the head of Gateway Ireland, told the Irish Times that the "company will not survive by just selling personal computers. It is restructuring itself to develop and sell more services and solutions", and that's probably the direction any new management would go in.

To make lots of money selling services, you need to sell lots of PCs to corporates - rather than consumers or small businesses. Gateway had struck a deal with Computacenter to handle all its high end corporate business, and the UK reselling giant is now planning to move the customers to another supplier.

Computacenter is expecting one more month's worth of manufacturing out of its partner, but there's likely to be a longer period of supply, as Gateway has to go through 90 days worth of consultation with its staff before shutting down.

Alongside Mike Maloney, other senior members of the UK and Ireland Gateway management team are: senior VP Martin Coles; director of marketing Neil Stevens; and VP Paul Heath. Heath and Stevens joined Gateway in May, a long time after rumours of Gateways' plans to leave the UK and Ireland first appeared. At that time Coles had just been promoted to senior VP. Stevens joined Gateway from Tiny Computers where he'd been marketing director for two years. Before that he was market development manager at Intel UK.

Naturally the managers involved with the MBO aren't talking to the press about their plans just yet. ®

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