Massive layoffs and restructuring by Gateway, the world's number four computer maker, will impact little on local distributor Gateway Systems Ltd - and may even help business, says local sales manager Paul Pearson.

Gateway chief executive officer Ted Waitt announced this week that the company will lay off 4,700 workers - 25 percent of its global work force - as well as winding up operations abroad as part of a plan to shift its focus away from the personal computer (PC) market which has fallen for the first time in 15 years.

Mr. Waitt said the company will aggressively move into marketing software, Internet access, financing, warranty and training services. These businesses generated approximately $259 million or 42 percent of Gateway's total gross profit last quarter.

Mr. Pearson told The Royal Gazette yesterday that although the PC market had slowed down during the past year, the local dealer had not been adversely affected due to its diversified services.

Mr. Pearson said the local company had a good relationship with Gateway but was only a reseller for the computer maker, and although the majority of their products were made by Gateway, they also sold other manufacturers' products.

Mr. Pearson said he felt Gateway's restructuring would be beneficial to the local distributor as he said it was now more likely that Gateway would focus on their resellers and said: "We are moving to a closer relationship with them."

Indeed, part of Gateway's new plan is to explore selling computers overseas through third-party vendors which is how the local store operates.

And Mr. Pearson said the local market was very diversified due to the specific needs of clients and the different configurations they require.

Gateway Bermuda is a true solutions provider as the store has one of the largest technical departments on the Island with just under 40 employees and part of the company's diversification is providing corporate networking, software development and educational expertise.

Roughly 90 percent of the local dealer's business is corporate and Mr. Pearson said there was currently strong demand for product renewal.

When asked about the future of the technology market, Mr. Pearson - who has been in the industry for 25 years - said that processing speeds on computer systems were doubling roughly every 18 months, and there would be real change when BTC rolled out its Digital Subscriber Lines which would enable users to download information from the Net at far higher speeds.

"Once it is rolled out fully, there will be a lot of interest in it. It will help the market," said Mr. Pearson.

When asked how the industry would fare during next two years, Mr. Pearson said: "There was lots of hype over Y2K which resulted in a lot of businesses using up their budget renewing their equipment. This coupled with the trend towards recession has meant a market slow down in general."

However, Mr. Pearson felt demand would return.

Moody's Investors Service, industry and Wall Street analysts reacted coldly to Gateway's plans and on Wednesday Moody's lowered their rating on Gateway's bonds to Baa3, a notch above "junk" status.

And earlier in the month, Standard & Poor's rating agency gave Gateway's debt a "junk" rating.

Moody's said the shrinking PC market combined with a fierce price war would put a drag on Gateway's earnings and revenues for at least the next few quarters and raised concerns about the company's ability to smoothly execute a reorientation of its business model.

Making low-cost desktops has been Gateway's speciality, transforming the company from its origins in an Iowa farmhouse in 1985 to a company with nearly $10 billion in sales last year. But by concentrating on selling desktops to US consumers, Gateway failed to branch out into the increasing notebook computers and servers markets.

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