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Gateway Denies Sale Rumors, Names New CFO

Gateway Denies Sale Rumors, Names New CFO

Mallinckrodt Transfers Operations, Cuts 125 From Staff at Carlsbad Plant

CYBERBUCKS

by Mike Allen, Senior Staff Writer

As it struggles to gain market share, Gateway Inc. said it’s not for sale, and hired a new CFO last week.

The Poway-based PC maker didn’t reveal much more, saying it was in a quiet period about three weeks from releasing its third quarter results.

However, Chairman and CEO Ted Waitt attempted to put to rest rumors that he’s entertaining a leveraged buyout.

“From time to time, we have discussions with all sorts of people, and we’re continually looking at the best ways to continue to grow,” he said, not elaborating nor taking questions.

If only Gateway was growing that might assuage the anxieties of its shareholders and remaining employees.

It’s not, despite Waitt’s pouring a small fortune into a television ad campaign (the dollar amount wasn’t revealed), that pits its PCs against those of Apple.

Some analysts say he’s waging a losing battle.

“When you get into price competition, usually nobody wins, and only the biggest players in the space are the ones that tend to survive, and Dell is the much stronger player,” says local high tech analyst Bruce Ahern.

The market is so tough, Gateway is actually trading at about 80 percent of its book value of $3.60, and below its cash liquidity value of $3.17.

As of Sept 19, GTW was at $2.87, down from about a year ago when it was above $10, and close to $7 in late January.

The biggest loser of all is Waitt, who founded the company 17 years ago and relocated its headquarters to San Diego in 1999. At the time he moved his office here, Waitt was worth about $9 billion. Today, his one-third stake is valued at only $400 million.

Gateway named Rodrick Sherwood III as new CFO, replacing Joe Burke, who moves over to senior vice president of business development. Burke said he wanted to return to North Carolina for family reasons.

Sherwood was recently CFO at Loudcloud, now called Opsware Inc. in Sunnyvale, and has a 20 year track record in corporate operations and finance.

Gateway’s local presence actually has grown in recent months to about 500 employees as it assimilates some workers who lost their jobs after the company closed its Lake Forest office, which had 350 employees.

Spokeswoman Ashley Wood said between 50 to 75 employees from the Orange County facility transferred here. In addition, it hired new employees in sales, administration, human relations, legal and Web design.

Total employment at Gateway stands at 10,500. About a year ago it was 19,000, and earlier this year it was 12,000. The majority of its work force is in South Dakota.

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Mallinckrodt Cuts Staff: Mallinckrodt, a St. Louis-based division of Tyco International Inc., said it has cut 125 workers from its Carlsbad facility, where it makes medical ventilators.

The layoffs at the facility, which once had about 800 workers, had nothing to do with the ongoing criminal prosecution of Tyco’s CEO Dennis Kozlowski and other executives for allegedly embezzling millions of dollars from the company, said spokeswoman June Fowler.

“It has nothing to do with that,” Fowler said. “We have overcapacity and we’ve been shifting manufacturing over the last few years.”

Operations that took place in Carlsbad are being transferred to Indianapolis, Pleasanton, and Ottawa.

The local plant will retain 75 employees. The Carlsbad plant once owned by Puritan Bennett was sold to Nellcor in the mid-1990s, and was acquired by Mallinckrodt in 1997. The latter firm cut the staff from about 800 to 400 in January 2000.

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Axesstel Debuts On OTC: Axesstel, a San Diego-based maker of wireless telecom equipment used in developing nations, has conducted a reverse merger with a shell firm to gain a presence on the over the counter bulletin board.

The move should help the 2-year-old firm obtain the needed financing it is seeking, said Bobby Cha, Axesstel’s COO.

“This allows us to market ourselves to a broader range of investors,” Cha said.

With gross revenues of about $14 million last year, and $15 million this year, Axesstel had been trying to raise about $5 million from private investors, but had hit a wall.

When the VCs and other startup investors saw the firm’s revenues, they backed away because they realized they couldn’t obtain significant equity position, Cha said.

As an alternative, the firm sought out and found a public company that was dormant for about a year called Miracom. As of Sept. 16, Axesstel took over Miracom’s trading rights, and changed its symbol from MRCM to AXES. First traded at 60 cents, the company closed at $2 Sept. 19.

Axesstel, which makes wireless local loops based on CDMA technology allows wireless phone transmission in a limited area coverage.

Its products are sold in 15 countries including most of South America, the Caribbean and eastern Europe. It has about 50 employees, including 20 in San Diego.

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Magis Gets $5 Million: Magis Networks, a San Diego-based developer of wireless chipsets, said it obtained $5 million in financing led by Elwin Capital Partners, a London-based VC, which was joined by AOL Time Warner, Hitachi, Motorola, Panasonic and Sanyo. The recent investment brings the total amount raised by the company to $45 million.

Magis chipsets enable wireless communications of video and audio through the home and office.

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Pegaso Deal Done: Qualcomm Inc. completed a deal to sell its 65 percent stake in Pegaso Telecommunications, Mexico’s second largest wireless carrier, to Telefonica Moviles, SA, a Spanish telecom corporation. Telefonica is combining with the Burillo Group to form a new entity that will own Pegaso and four other Mexican mobile telephone operators.

As a result of the transaction, Qualcomm said it will receive $525 million in cash within 60 days. It plans to take $140 million from that amount and purchase secured Pegaso debt to bring the total amount of Pegaso debt to about $480 million, the company said.

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MIT Enterprise Forum Officers: The new chairman of the MIT Enterprise Forum is Amy Romaker, director of practice and client development, Pillsbury Winthrop, who replaces Mark Lee, senior vice president of California Bank and Trust. Its board of directors are Bob Blumberg of SMS Technologies; Jacqueline Townsend Konstanturos of the Townsend Agency; Kenneth King of Signal Consulting; Marco Thompson of the San Diego Telecom Council; Michael Jones of ProFinance Associates; Michael Snow of Electropure; Peter Farrell of ResMed; Reo Carr of the Daily Transcript; Sanford Ehrlich of SDSU Entrepreneurial Management Center; Barry Schwartz of MIT Alumni Club; Tyler Orion of the San Diego RTA; and Bob Pryor, Inovie Software.

Send high tech finance news to

mallen@sdbj.com.

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