Maybe yesterday, April Fool's Day, wasn't the best choice for an announcement of this magnitude: Gateway (NYSE:GTW) will close all its remaining stores in the U.S. With Progressive Insurance (NYSE:PGR) taken up with new offers for UFO insurance, and the Fool home page full of amusing falsehoods, Gateway's terse press release, with few details, seemed too abrupt to be true. The decision will shutter 188 stores and put 2,500 employees on the job hunt. Its products will be available for direct purchase and at retail stores.
Last month, the firm purchased budget computer maker eMachines and shuffled that firm's management into Gateway's boardroom. For those of you who are asking yourselves "Doesn't Gateway already make computers?" here is a whirlwind refresher:
Gateway is really trying to find its soul. It pretty much got clobbered in the computer market by monsters Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ). In response, the cow-spotted tech survivor has tried just about everything, from peddling billboard-sized plasma TVs to DVD players and digital cameras. With a pile of cash and a well-known brand, it can afford to try its hand at dishing out whatever's hot. But the strategy is starting to look desperate. (As the summer lemonade season revs up, I wouldn't be surprised to see Gateway setting up a stand on my block.)
Exiting the retail business may remove some expensive overhead, but even a casual observer can see that what the firm really needs is a focus. Gateway may have gumption, and it may have a cash cushion, but shareholders should also hold out for some clarity and -- dare I suggest? -- evidence of a strategic advantage. The shelves of Best Buy (NYSE:BBY), Circuit City (NYSE:CC), and Wal-Mart (NYSE:WMT) are overstuffed with consumer electronics, and without the retail stores to initiate relationships with consumers, Gateway needs to find some way to stand out.
David Gardner recommended Dell for subscribers of Motley Fool Stock Advisor . You can check out the newsletter, with a money-back guarantee, for six months.
Fool contributor and animal-rights activist Seth Jayson used to tip Gateway boxes. He has no stake in any company mentioned above. View his Fool profile here.
