Gateway (GTW) CEO Theodore Waitt is still fighting to get his struggling PC maker back in the game. On Sept. 3, the Poway (Calif.) company said it would close one of its two manufacturing plants, cut 450 of its 8,500 employees, and outsource much of its production to partners it will select by the end of October.
It's the second major restructuring Waitt has undertaken this year. In March, Gateway closed 80 stores and laid off 1,900 employees. All told, Waitt expects to save $515 million a year. Investors approve: Gateway's stock has tripled to $6 since March.
The cost-cutting will help win some breathing room for Waitt, who has struggled to fend off rival Dell for three years. Analysts expect Gateway to report a $287 million loss on $3.5 billion in sales this year.
The cuts will also buy time for Gateway's efforts to expand beyond PCs into such gadgets as digital TVs and digital cameras to pay off. Sales in its Gateway Country stores have been encouraging so far. But getting leaner will be the only way for the PC maker to curb its losses. The 2004 model year doesn't officially start until Oct. 1, but the incentive battle for '04 models is already heating up. Chrysler Group (DCX) on Aug. 28 raised incentives on most of its '04s to $500 to $3,000. The carmaker, whose sales are down 4.7% this year, says it's taking the lead in setting incentives from rival General Motors. GM on Sept. 3 kicked in an extra $500 cash on some big trucks. Ford Motor now offers only minor 2004 incentives but may want to reconsider after August's 15% sales decline. Meanwhile, deals to move out 2003 models are in high gear. The nation's battered airlines are finally showing signs of recovery, and relieved investors are boosting the stocks. Thanks to decent summer traffic and reduced capacity, the major carriers reported packed planes and stronger revenue in August. Continental Airlines (CAL) for one, announced on Sept. 2 that its revenue for each seat flown a mile -- a widely watched industry measure -- rose a higher-than-expected 4% to 5% in August on a 1.7% increase in traffic. That's on top of a 4.8% unit revenue gain in July. Analyst Sam Buttrick of UBS Warburg (UBS) now expects the major U.S. carriers to lose $400 million in the third quarter, half the loss he previously forecast. Despite great uncertainty over how strong business traffic will be this fall, investors pushed up the American Stock Exchange airline index to near a 14-month high. WebMD (HLTH) got an unwelcome house call on Sept. 3, when federal agents searched its offices in connection with an ongoing probe. According to the Internet health-care company, the U.S. Justice Dept. is investigating its acquisitions of dealers who distributed its Medical Manager (HLTH) practice-management software for doctors. A 1999 financial restatement by Medical Manager is also under investigation. The company contends the search was based on information from two former employees whom WebMD has sued for taking kickbacks. WebMD says it does not expect the investigation to affect operations. J.P. Morgan Chase (JPM) out competition that included Wachovia (WB) Bank One, and Bank of America when it was named head of the newly created Trade Bank of Iraq on Sept. 2. J.P. Morgan will run a consortium of 13 banks representing 14 countries that will finance the rebuilding of the war-torn country. Almost 60 banks competed for the lucrative four-year contract, expected to bring in millions in fees. The new bank will guarantee purchases made by both the private and public sectors, much as trade banks did in Japan and Germany after World War II. The poorest nations of Latin America, Africa, and Asia will be able to import generic copies of drugs to fight the worst epidemics under a tentative deal worked out on Aug. 30 among the 146 nations of the World Trade Organization. Delicate negotiations in Geneva set the stage for much broader WTO talks in Canc?n, Mexico, on Sept. 10-14. The deal is a major victory for poor nations that are struggling with AIDS, malaria, and tuberculosis but lack the capacity to manufacture generic forms of patented medications. They'll be allowed to import those drugs from nations such as Brazil, India, and South Africa without running afoul of international trade laws on patents. The deal requires manufacturers to follow certain guidelines to make sure the cheaper drugs don't wind up in other countries. -- Heinz' first-quarter earnings more than doubled from the year-ago period.
-- A federal court stayed the FCC's new media-ownership rules.
-- The U.S. Energy Dept. is investigating the spike in gasoline prices. The news was less than heavenly when Hain Celestial Group (HAIN), maker of Celestial Seasonings teas and Terra Chips, predicted earnings per share for fiscal 2004 will hit just 95 cents to $1.03. With analysts expecting $1.05, investors pummeled the stock: It fell 13% on Sept. 3, to $17.65.