today posted a third-quarter loss as the company was hit with
excess inventory and charges.
The mail-order computer maker posted a net loss of $107.1 million, or 68
cents a share, for the quarter ending September 30, compared with net
profits of $60.7 million, or 39 cents a share, a year ago.
Gateway also took a onetime charge of $113.8 million for its
acquisition of Advanced Logic Research, for the assets of Amiga Technologies, severance costs from its recent round of
layoffs, as well as the canceling of one software project and spending on certain computer equipment.
Gateway was expected to post a revised net profit of 11 cents for the quarter, according to First Call?s consensus of analysts'
analysts said the company missed the mark "moderately."
The computer maker cited excess inventory and significant declines in the
market value of its inventory of components as the reason for lower profit
margins. The company's gross margin in the quarter fell to 13 percent of
sales, compared with 18 percent a year ago.
Revenues for the quarter reached $1.5 billion, up 25 percent from the same
time last year. This came as unit shipments increased 31 percent, to 622,000
in the quarter, up from 474,000 a year ago.
"We continue to gain market share, but our growth in the quarter wasn't what
we expected," Gateway chairman and chief executive Ted Waitt said in a
statement. "We took aggressive action on our inventory issues and remain
focused on reducing overhead costs. We ended the quarter with accelerating
demand, which contributed to our backlog growing by nearly 40,000 units over
Last month, the company issued a preliminary warning that its quarter
would fall short of expectations, which at the time pegged profits at 47
cents a share.
Meanwhile, Gateway's anticipated sluggish performance comes at a time when
other major computer makers are surpassing analysts? expectations. Compaq, for example, posted record
third-quarter sales, and IBM pulled in
third-quarter results as well. Dell, which reports next month, also is
expected to post an improved third quarter over year-ago figures.
Gateway is currently undergoing a restructuring, which to date has
resulted in trimming at least 2 percent, or 300 employees, from its
worldwide workforce of 12,000.
Late in the quarter, Gateway made a number of product introductions, in
response to the needs of corporate customers. But analysts have said
Gateway may have overestimated sales to enterprise customers.
"They are seeing unit growth, but not the kind of ASPs or profitability
that they thought they would," Daniel Kunstler, a technology analyst
for J.P. Morgan Securities, said in an
During the latest quarter, Gateway introduced its first server computer
products based on systems designed by ALR,
which Gateway bought earlier this year. It also introduced new high-power
personal workstation computers. In May, the company rolled out its E-series
desktop computers for corporate customers.
Analysts note that it will take some time to get corporate buyers to pay
attention to market newcomers, so it is too early to tell whether Gateway's
foray into enterprise will work over the long term.
Despite the company?s falling performance, however, talk of Gateway being
an acquisition target helped bolster the stock last July. The stock hit a
52-week high of 46-1/4 last summer, but has since trended down, closing at
31-1/4, down 1-5/8 from yesterday.