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Gateway goes directly to great quarter

Gateway 2000, the nation's largest direct retailer of PCs, posted a 48.3 percent increase in profits for the third quarter, exceeding analysts' estimates.

Gateway 2000 (GATE), the nation's largest direct retailer of PCs, posted a 48.3 percent increase in profits for the third quarter, exceeding analysts' estimates.

Gateway reported profits of $60.7 million, or 78 cents a share, for the quarter ending September 30, compared with $40.9 million or 52 cents per share a year ago. Wall Street had anticipated the company would earn 73 cents a share, according to First Call.

Revenues, meanwhile, rose to $1.2 million, up 35.4 percent compared with a year ago.

"This was another exceptional quarter for the company, with excellent growth in unit sales volume and better than target gross margins," stated Ted Waitt, chairman and chief executive.

He added that the company's profits improved due to timing price cuts after decreases in component costs and by having a better product mix.

Gateway's Solo portable product line grew three times the pace over last year, and now representing a record 10 percent of total revenues.

The company also opened two factory-direct retail stores in August, a move designed to increase interest in the products and increase awareness for the company's direct sales method.

The fourth quarter holds promise as well, the company said. "We are entering the fourth quarter with some really hot product plans, favorable backlogs and extremely attractive prices. Although DRAM (dynamic RAM) costs have stabilized relative to the large declines earlier in the year, we expect component costs to generally decline along traditional lines," Waitt added.