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Gateway drops on earnings news

Gateway shares fall more than 10 percent and some analysts downgraded the stock, after reporting lower-than-expected quarterly earnings.

Gateway shares fell more than 10 percent today, and some analysts have downgraded the stock one day after the company reported lower-than-expected quarterly earnings due to lower average selling prices.

The stock closed the day down 6.125 at 52.625. Gateway has traded as high as 68.75 and as low as 25.0625 in the past 52 weeks. Some 2.16 million shares had changed hands.

Gateway was downgraded to "hold" from "buy" by analyst Donald Young at Prudential Securities. The PC maker was downgraded to "neutral" from "buy" by analyst Kimberly Alexy at Lehman Brothers. Alexy's 12-month target price is $60 per share.

Salomon Smith Barney's analyst upgraded Gateway to "buy" from accumulate, however.

Price wars and cutthroat competition continue to cut into profits of PC makers.

As reported, Gateway posted second-quarter net income of $60.7 million, or 38 cents a share, compared with net income of $56.4 million, or 36 cents a share, reported for the like quarter a year ago. Wall Street predicted that the company would post profits of 44 cents a share, according to First Call. Its quarterly revenue rose to $1.62 billion from $1.39 billion a year ago.

Gateway said that its average unit price declined 12.5 percent to $2,200 in the quarter compared to the prior year's quarter.

Bloomberg contributed to this report.