Gateway's plans to close its European headquarters in Dublin will almost certainly mean the loss of 900 jobs. It will also heighten fears among the 50,000 people employed in the high-tech sector that further job losses and company closures could be on the way.
Gateway is a flagship IDA Ireland investment and its decision to close its Clonshaugh facility is evidence the Republic will not be spared from the slowdown in the global technology industry.
Gateway's departure will mean the largest loss of employment in the technology sector since Seagate pulled out of Clonmel in 1997, making 1,400 staff redundant.
Gateway's Dublin operation was established in 1993 to manufacture and supply personal computers and services to the Europe, Middle East and African regions.
It was at the centre of Gateway's strategy to expand into a global business and received more than £20 million in Government grants.
However, in common with Xerox, which recently made 370 employees redundant in Dundalk, Gateway is fighting for survival and is prepared to take radical action to return to profitability.
Mr Mike Maloney, managing director Gateway Ireland, confirmed last night that the company was proposing to exit the UK and Irish markets to concentrate on the US market.
"The company will not survive by just selling personal computers. It is restructuring itself to develop and sell more services and solutions," he said.
Analysts believe Gateway may completely exit the Europe, Middle East and African regions where it has failed to claim sufficient market share.
Mr Sami Pohjolainen, research manager with technology consultancy IDC, said Gateway had slipped out of the top 10 in the UK and was now placed just 10th in Ireland.
The company had encountered stiff competition in Europe from vendors such as Dell, which enjoyed much greater economies of scale than Gateway due to its supply chain management.
Despite introducing big price cuts, Gateway's sales in the past quarter declined 46 per cent in the European region, prompting it to review its entire operation.
Mr Maloney said no Gateway customers would lose out from the company's decision to pull out of the area because it would continue to operate some form of technical support facility.
The IDA is currently negotiating with Gateway to try to encourage the firm to keep these technical support operations in Dublin.
It is understood Gateway is keen to outsource this function to another company and transfer some of its 250 support staff to the new firm. A final decision by Gateway on the closure is expected to be made following a 30-day consultation period with employees. Gateway management admitted last night that it is unlikely the decision will be reversed.
Although the company had already hinted it may pull out of Dublin, yesterday's announcement will increase the fears of workers about job security right across the technology sector.
IDA Ireland said yesterday further job losses in the technology sector and even closures are likely over the next few months until there was an upturn in the sector. "We're in the middle of a steep industry downturn and I don't think we have seen the last bad news," said Mr Martin Cronin, a director of IDA Ireland.
The telecoms and personal computer industries have been hit hardest by the current slowdown as corporates and individuals put off new equipment purchases to save cash.
Telecommunications equipment maker Lucent said yesterday it would enter discussions with trade unions across Europe about job losses this week.
Redundancies among the 900 staff at the company's European headquarters have not been ruled out. The company expects to make between 15,000-20,000 redundant worldwide.
Almost all the major personal computer manufacturers have operations in the Republic, including Dell, Compaq, Apple Computers, IBM and Hewlett Packard.
Already Dell has shed staff through voluntary redundancies and fears are growing that Compaq, which is reviewing its Irish operations, may announce job cuts.
Last night the Tanaiste said there remained a strong labour market despite the recent downturn in the US technology sector.
However, she also outlined that the Government could review the migrant work visas system if the situation changed.
She said she was hopeful that with the help of the relevant State agencies, alternative employment opportunities could be made available for the Gateway staff.