THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, September 30, 1995 TAG: 9509300309
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MYLENE MANGALINDAN, STAFF WRITER
LENGTH: Long : 114 lines
Gateway 2000, the country's leading direct marketer of personal computers, has picked Hampton for an $18 million East Coast manufacturing and distribution center, Gov. George F. Allen announced Friday.
The plant will open in 1996 with 250 employees, company officials said. It will employ 1,000 by 1999 with a payroll of $18.4 million, making it the city's largest employer. The average annual salary will be about $18,000 for assembly and light manufacturing jobs.
The South Dakota-based, Fortune 500 company makes personal computers and sells them directly to consumers. Its Hampton plant will ship desktop PCs to customers east of the Mississippi.
Gateway's choice of Hampton focuses more attention upon the state's efforts to create a modern identity by building a foundation for high-tech industry.
``It shows the promise of the kind of companies coming to the Peninsula,'' said Julius A. Denton, president of the Virginia Peninsula Economic Development Council.
Motorola and IBM/Toshiba both announced plans earlier this year to open semiconductor plants in Virginia, prompting state officials and others to pronounce Thomas Jefferson's state as the latest ``silicon dominion.''
``It's another shining part of our renaissance here in Virginia,'' Allen said about the expansion of the state's industries to include high tech.
``It's expanding our intellectual frontiers. It's changing the way the world looks at Virginia. It's changing the way we look at ourselves,'' he said.
The governor awarded Gateway $1 million from his Opportunity Virginia fund, which helps to pay infrastructure costs for companies locating in the commonwealth. The Virginia Department of Economic Development will also help the company with work force training.
Information about the incentive package from local governments has not been released.
The Hampton plant will be the company's second manufacturing facility in the United States. The company's other plant is in Missouri and its headquarters is in North Sioux City, S.D. It also operates a manufacturing plant in Dublin, Ireland. The company employs 7,700 people worldwide.
Gateway's laid-back president and chief executive, Theodore Waitt, flashed his dimples and shook his ponytail throughout the afternoon press conference in front of the Virginia Air and Space Museum along Hampton's waterfront.
``Hampton was not an automatic choice for us,'' Waitt said. Gateway embarked upon a national search for its second manufacturing facility that came down to North Carolina, South Carolina and Virginia. It began negotiating with state and local officials six months ago.
``Why choose Hampton? We found a community with a lot of the cultural core values we have in South Dakota,'' Waitt said.
He cited the highly skilled work force and the aggressive, pro-growth attitude of state and local leaders as other key factors in his company's decision.
``Once we met my main man, (Hampton Mayor) Jimmy Eason here, the choice to relocate to Hampton was logical,'' he said, saluting the mayor's efforts to work with Gateway.
Gateway's Hampton location will put the company within reach of 65 percent of its market, said Denton.
``They wanted to do better with their shipping situation and serve customers better,'' he said.
Gateway produces computers after customers order them. It has had problems meeting some of the demand. This manufacturing facility will help speed up that process.
Keith Taylor, James City County's economic development director, said that the company looked for three things: interstate visibility, access to a good labor pool and location in an enterprise zone.
``They seemed to be non-negotiable issues,'' Taylor said.
Gateway's plant will be built on a 50-acre tract in the Hampton Roads Center industrial park by Interstate 64 and Hampton Roads Center Parkway. Construction will begin immediately.
Gateway does not have an in-house research and development department, Waitt said. It uses ``virtual engineering'' which means introducing the latest technology to the market through its final product.
But the company's CEO said he expects to see many of the firm's suppliers and other vendors open up operations nearby.
``A lot of our suppliers like to be close to us,'' Waitt said. That's been the pattern with Gateway's other facilities like its North Sioux City headquarters, where its hard drive supplier, Western Digital, and others have located.
Computer industry analysts say that Gateway is financially solid.
``It's a very good company,'' Wendy Abramowitz, an analyst with Argus Research. ``They're one of the leading direct PC manufacturers. Their earnings have been increasing at a very rapid pace this year, which would explain their expansion into your territory.''
Founded by Waitt in a barn on his family's Iowa cattle farm, Gateway earned $2.7 billion in 1994. Its trademark black-and-white Holstein cow spots, which decorate the computer shipping boxes and other ads, symbolize the company's humble beginnings, Waitt said. In 10 years, it rose from a company started on a farm, to No. 248 on the Fortune 500 list last year.
``They're definitely an up-and-coming player,'' said Kurt King, a senior analyst with Montgomery Securities in San Francisco. ``Gateway certainly is a growing company and needs to expand capacity. In their current South Dakota location, they've tapped out that labor pool.''
Gateway commands 2 percent of the entire worldwide PC business, which analysts say is significant in a highly fragmented and cut-throat business where PC manufacturers like Compaq, Dell, IBM and others vie for a bigger sliver of the market.
Gateway is capable of growing between 25 percent and 35 percent a year and possibly more than that in revenue, King said.
Some analysts say that Gateway's growth is faster than the rest of the industry, particularly because it focuses on the consumer and small business segment of the PC market.
Gateway's stock closed at 32 3/8, up 3 3/8 on Friday. An analyst from CS First Boston raised his investment recommendation on the stock to ``buy'' from a ``hold.'' ILLUSTRATION: Color staff map by Ken Wright
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