Gateway to Sell Professional Business Segment to MPC Corporation
September 05 2007 - 12:35AM
PR Newswire (US)
Sale Enables Company to Concentrate on Worldwide Consumer Market,
Simplify its Business Model, and Leverage Reduced Cost Structure
Irvine, Calif., Sept. 5 /PRNewswire-FirstCall/ -- Gateway, Inc.
(NYSE:GTW) today announced that it has signed a definitive
agreement to sell its Professional business segment, including the
company's Nashville-based configuration center, to MPC Corporation
(AMEX:MPZ). The transaction, valued at approximately $90 million
based on MPC's closing price on Sept. 4, 2007, is subject to
regulatory approval and is anticipated to close early in the fourth
quarter. "Gateway is widely recognized as a leading consumer brand
and this enables us to concentrate our efforts on our worldwide
consumer channels," said Ed Coleman, Gateway's CEO. "While our
performance in the highly competitive Professional segment has
improved, we believe a more focused approach on the largest segment
of our business is in the best interests of investors and consumers
alike." With double digit-share of the U.S. consumer PC market, and
an even stronger share of the retail channel, Gateway embarked on a
consumer focused strategy early this year. The sale of its
Professional business will simplify the existing business model and
enable greater emphasis on growing the company's overall consumer
business, both in the U.S. and internationally. "This is yet
another step in maximizing the importance of Gateway's powerful
foundation as a consumer brand," continued Coleman. "Coupled with
continued product innovation and a strong presence in retail and
direct channels, this enables us to further drive a strategy that
sharpens our focus, not only in the U.S. but abroad as well."
Gateway's Professional business targets businesses, government
agencies and educational institutions. Once the deal closes, a
significant portion of Gateway's Professional employees will join
MPC and continue to work out of the North Sioux City, SD facility.
MPC will assume Gateway's ownership in its final assembly facility
(GCC) located in Nashville, Tenn., and will take full
responsibility for this facility, including the assembly of Gateway
Professional products produced there. MPC will also acquire the
portion of Gateway's Consumer Direct unit that targets businesses
with less than 100 employees. The combination of Gateway
Professional and MPC will greatly benefit existing Professional
employees and customers. In joining with MPC, Gateway Professional
will become part of a business that is dedicated to the unique and
specialized requirements of professional customers. For these
customers, Gateway's portfolio of award-winning Professional
products will be augmented by MPC's products and services. MPC will
continue to offer Gateway Professional products to ensure product
stability for Professional customers, however, the product branding
will be migrated from the Gateway brand to the MPC brand within a
year. "We believe that the customers of MPC and Gateway's
Professional business will benefit greatly from this combination,"
said John P. Yeros, Chairman and CEO of MPC Corporation. "The new
company will be totally focused on the markets of government,
education, and small-and-medium business, and will develop products
and services to meet the specific needs of these customers." As
part of the transaction, MPC will assume responsibility for all
operations and warranty support associated with Gateway's
Professional business, valued at approximately $60 million. In
addition, Gateway will invest approximately $10 million in MPC in
the form of a note issuance tied to excess inventory at the GCC.
Gateway will receive a 19.9% equity stake in MPC Corporation at the
close of the transaction. As part of the transaction, Gateway will
take an impairment charge of approximately $16 million
predominantly related to IT assets associated with the Professional
business. The final numbers will be determined upon the close of
this transaction. Gateway's Professional business generated $75
million in gross margin dollars over the past four quarters (Q3
2006 -- Q2 2007). As a result of the sale of its Professional
business, assuming it closes, Gateway expects that it will be able
to streamline its total SG&A by $130 million to $150 million
annually, following a transition period and its attendant costs.
"On behalf of the Gateway Board and management team, I'd like to
thank our Professional employees for their hard work and commitment
over the years," said Coleman. "I'd also like to thank our
Professional customers for their loyalty to Gateway, and believe
that the combination of Gateway Professional and MPC will result in
a highly-focused organization that can better compete and thrive in
this competitive segment." About Gateway Since its founding in
1985, Irvine, Calif.-based Gateway (NYSE:GTW) has been a technology
pioneer, offering award-winning PCs, servers and related products
to consumers, businesses, government agencies and schools. Gateway
is the third largest PC company in the U.S. and among the top ten
worldwide. The company's value-based eMachines brand is sold
exclusively by leading retailers worldwide, while the premium
Gateway line is available at major retailers, over the web and
phone, and through its direct and indirect sales force. See
http://www.gateway.com/ for more information. Special note This
press release contains forward-looking statements that involve
risks and uncertainties, as well as assumptions that, if they do
not materialize or prove incorrect, could cause Gateway's results
to differ materially from those expressed or implied by such
forward-looking statements. All statements, other than statements
of historical fact, are statements that could be forward-looking
statements, including any projections or preliminary estimates of
earnings, revenues, or other financial items; any statements of
plans, strategies and objectives of management for future
operations; the extent of seasonal changes in demand; any
statements regarding proposed new products, services or
developments; any statements regarding future economic conditions
or performance; statements of belief and any statement of
assumptions underlying any of the foregoing. The risks that
contribute to the uncertain nature of these statements include,
among others, risks related to shifting our distribution model to
third-party retail; competitive factors and pricing pressures,
including the impact of aggressive pricing cuts by larger
competitors; general conditions in the personal computing industry,
including changes in overall demand and average selling prices,
shifts from desktops to mobile computing products and information
appliances and the impact of new microprocessors and operating
software; the ability to simplify the company's business, change
its distribution model and restructure its operations and cost
structure; component supply shortages; short product cycles; the
ability to access new technology; infrastructure requirements;
risks of international business; foreign currency fluctuations;
risks relating to new or acquired businesses, joint ventures and
strategic alliances; risks related to financing customer orders;
changes in accounting rules; the impact of litigation and
government regulation generally; inventory risks due to shifts in
market demand; the impact of employee reductions and management
changes and additions; and general economic conditions, and other
risks described from time to time in Gateway's Securities and
Exchange Commission periodic reports and filings. Gateway assumes
no obligation to update any forward-looking statements to reflect
events that occur or circumstances that exist after the date on
which they were made. DATASOURCE: Gateway, Inc. CONTACT: David
Hallisey of Gateway, Inc., +1-949-471-7703, ; or Angela Lewton of
MPC Corporation, +1-208-893-3843, Web site: http://www.gateway.com/
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