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Gateway posts wider loss

The company reports a loss of $114 million, due partly to a shortage of its Media Center PCs and fierce price competition among rivals.

Gateway posted a wider fourth-quarter loss, due partly to a shortage of its Media Center PCs and fierce price competition among rivals.

The company on Thursday reported a loss of $114 million, or 35 cents a share, for the quarter ended Dec. 31. That was in line with its warning earlier this month. Last year, the company reported a loss of $72 million, or 22 cents a share.

Excluding restructuring charges and tax provisions, Gateway posted a loss of $49 million, or 15 cents a share. That was on par with analysts' revised expectations, according to Thomson First Call.

The computer maker's revenue fell to $875 million from $1.06 billion a year ago. Wall Street expected the company to report revenue of $881 million.

Gateway continues to face challenges with its traditional PC business. Over the last year, the company has launched a strategy to transform itself into a high-end consumer electronics manufacturer to offset some of those losses.

"Although we're disappointed we didn't generate the (sales) that we needed to, we're looking forward to accelerating our growth, while looking for ways to leverage our strengths," said Ted Waitt, chief executive, during a conference call with analysts.

The fourth quarter provided the first big test of the company's strategy. However, brisk sales of digital televisions and cameras were not enough to counter Gateway's sales slump in traditional PCs, as a price war on low-end desktops and notebooks ate into its profits.

The company's financial performance was also hurt by a shortage of its popular 610 Media Center PC, FMC-901 Family Room Media Center PC and HDTV sets.

Gateway estimated it could have sold an additional 10,000 units of its Media Center PCs if not for the shortage. Waitt added that the high-end Media Center PC was, surprisingly, selling better than the low-end version.

The company also plans to take several steps to improve its financial performance over the next several months.

"We will evaluate our store base carefully over the next few months and will have more to say on this over time," Waitt said.

Gateway is considering relocating some of its stores to areas where foot traffic is higher, company executives said.

"Once the stores get to profitability, everything else will follow pretty rapidly," said Rod Sherwood, Gateway chief financial officer, during the conference call.

The company is also re-evaluating its strategy in the low-end PC market and expects to take action in the near future, Waitt said, declining to elaborate.