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Fourth-quarter warning from Gateway

update The direct PC seller warns that its fourth-quarter sales fell short of its already lowered estimates and it will post a greater-than-anticipated loss for the quarter.

update Direct PC seller Gateway warned Tuesday that its fourth-quarter sales fell short of its already lowered estimates and said it would post a greater-than-anticipated loss for the quarter.

Gateway said it now expects to report fourth-quarter revenue of approximately $1.06 billion and a net loss of approximately 18 cents or 19 cents per share. The company had originally forecast a loss of 10 cents to 13 cents per share, but CEO Ted Waitt said in December that Gateway would need a best-case scenario to reach even the low end of that prediction.

"We experienced demand softness early in the quarter, which we partially offset with aggressive promotions in December," Waitt said in a statement. "While our quarterly unit volume pace gained velocity at the end of the quarter, the need to invest in spurring that demand through promotions significantly increased margin pressure."

Additionally, Gateway said Tuesday that it is "currently evaluating" a dispute with a major partner that could lead the company to post an additional net loss of up to 3 cents per share for the quarter. On a conference call with analysts, Waitt declined to offer further details on the partner dispute or to name the partner in question.

Gateway will post full results Jan. 29.

Chief Financial Officer Rod Sherwood said on the conference call that the company is eyeing continued cost cuts and expects each of its ways of doing business--over the phone, on the Web and through its stores--to be profitable. Sherwood said the company will look at each of its more than 270 stores and evaluate "whether each store is creating shareholder value."

The company said it ended last year with $1.05 billion in cash and marketable securities and expects to end this year with more than $1 billion in cash and securities, in part due to $200 million in expected tax refunds.