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Gateway to report more financial details

When it reports its fourth-quarter results Thursday, the PC maker will offer analysts a far finer view of its financial data than most of its PC market compatriots.

Gateway is giving out new viewfinders to Wall Street.

The PC maker, which has been hit harder than its competitors in a brutal PC market, plans to give greater details of its financial data beginning with the release of its fourth-quarter results Thursday, a move that analysts say will help them devise more accurate earnings forecasts for the company.

When it announces results, and possible layoffs, in the afternoon, Gateway plans to set up new categories that will go beyond its two previous financial reporting categories--PC and non-PC business. The revenue and profit data will be sliced thinner, into Gateway's six business lines: hardware, finance, training, applications, support services and communications.

These narrower slices will give a far finer view than most PC makers provide. Compaq Computer, for example, breaks its revenue, which is larger, into three categories: access devices, enterprise computing and services.

"The more granular the data, the better we can do with our bottom-up forecasting," Needham analyst Charlie Wolf said. He added that with Gateway's previous categories, it was difficult to feel comfortable devising an earnings model for the company's beyond-the-box, or non-PC, business.

Gateway is trying to reverse its history of earnings-related problems. Over the past two years, the company has had a string of quarterly warnings and missed estimates. In 2001, it missed analyst estimates in the second quarter and issued a warning in the third. In the preceding year, Gateway--along with a number of other hardware makers--missed estimates in three out of four quarters, according to First Call. Earlier this month, Gateway issued a fourth-quarter update, saying that while its forecast for profitability remains intact, revenue and unit shipments would fall short of Wall Street expectations.

see special report: Gateway CEO's painful homecoming Ted Waitt, Gateway's chief executive, said in an interview that the move toward reporting financial data on the six lines of business is intended to offer greater clarity.

"At a higher level, even more important than unit shipments, is: 'What's your revenue? What's your average order size? How many total items are in each order? And are we really delivering that full solution?'" Waitt said.

The market potential for beyond-the-box sales is large, but questions remain as to how much of the market Gateway will grab.

During the first nine months of last year, the company generated a total of $968 million in non-PC revenue--representing less than 1 percent of the projected $196 billion non-hardware market, based on Gateway's target customers.