Gateway sells off its business unit

Gateway Inc. is getting out of the business of making and selling computers to business and will concentrate exclusively on consumers.

Gateway, No. 275 in the Internet Retailer Top 500 Guide, is selling its professional business segment, including the company`s Nashville computer configuration center, to MPC Corp. in deal valued at $90 million. Based in Nampa, ID, MPC manufactures desktop and notebook PCs, servers and data storage systems for business and government.

The deal is expected to close by the fourth quarter. 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 tied to excess inventory, the company says. Gateway will receive a 19.9% equity stake in MPC at the close of the transaction. As part of the transaction, Gateway will take an impairment charge of approximately $16 million.

With annual sales of about $75 million, Gateway`s professional business targets businesses, government agencies and educational institutions. But Gateway, a manufacturer and direct marketer of personal computers and consumer electronics, sees bigger growth opportunities by concentrating only on the consumer side of the business. “The sale of the 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,” says Gateway CEO Ed Coleman.

Gateway reported net income of $1.9 million on revenue of $841 million in the second quarter, compared with a net loss of $8.6 million on sales of $919 million in the prior year. But the company is still losing ground in its direct sales channel, which includes e-commerce. In the second quarter, Gateway’s direct channel sales dropped to $54 million, down 30% from Q2 of 2006.