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December 7, 2006

Gateway bows to investor activists with new directors

Gateway Inc, the third-largest PC supplier to the US consumer and SMB market, has avoided a proxy fight by agreeing to add two new directors to its board.

By CBR Staff Writer

Investor activists, including Firebrand Partners LLC and Harbert Management Corp, which together own about a 10% stake in Gateway’s outstanding shares, had called for three new additions to Gateway’s board in late October.

The investors said new board members would help solve the inertia of Gateway’s current board. If not, then Gateway should be sold, according to the investors.

Gateway has now agreed to appoint Scott Galloway, an associate professor at New York University’s Stern School of Business and Firebrand managing manger, to its board, per the investors’ request. A second director, which the investors’ must approve, will be appointed by February 28.

Not including Galloway, Gateway had eight directors on its board, seven of whom are independent.

Gateway also has agreed to review its poison pill shareholder rights plan, which is designed to discourage hostile takeover offers, before its annual meeting next year. Investors had previously asked the company to scratch its anti-takeover provision.

Gateway, which posted a $7.4m loss in the second quarter, turned down several buyout offers in September from Lap Shun Hui, who sold eMachines Inc to the company in 2004.

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