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Portables drive Gateway profits

Historic highs in sales of Gateway Solo portables drive earnings to meet Wall Street's expectations for the quarter.

Gateway (GTW), which recently launched a number of initiatives to capture the corporate market, today announced a 10 percent jump in second-quarter profits, as sales of its Gateway Solo line of portable PCs hit historic highs for the quarter.

Gateway posted net profits of $56.5 million, or 36 cents a share, for the quarter ending June 30, compared with $51.4 million, or 33 cents a share, a year ago.

Analysts had expected the company to post earnings of 36 cents a share, according to First Call.

Revenues, meanwhile, rose to $1.39 billion, up 23 percent from a year ago.

"We are confident about our market position and our ability to leverage the investments we've put in place. We anticipate increasing our competitiveness in the corporate marketplace, which should accelerate our revenue growth in what we expect will be a very strong overall market in the second half of the year," Gateway chairman and chief executive officer Ted Waitt said in a statement.

During the quarter, Gateway started to focus on the growing corporate market segment, a fast-growing and major share of the company's revenues. The company had previously only concentrated on individuals and small businesses.

Large corporations are being targeted with Gateway's new "E" series desktop computers. The corporate market, which tends to lag behind the consumer market in adopting new technologies quickly, prompted Gateway to develop a line of products to address those needs.

Gateway began shipping the E series this quarter.

Meanwhile, Gateway's recent proposed merger with Advanced Logic Research also bought the company its desired credibility in the corporate market. The merger will allow companies to buy both desktop PCs and servers from the same Gateway vendor.

The merger also allows Gateway to expand its distribution channels.

ALR sells its products through VARs, or value-added resellers. The two companies are planning to mix and match their products to serve both the direct and VAR sales channels. ALR will sell Gateway products under its own brand name while Gateway says it expects to start selling servers directly to customers by the fourth quarter.

Gateway also announced plans to expand distribution internationally earlier this month. In Japan, the company announced that it would sell systems to businesses through a large systems integrator, while continuing to sell directly to home and small business users.

Gateway is also becoming a force in notebook PCs. Gateway has racked up some favorable product reviews for its notebooks, which are fully plugged into Intel's notebook PC strategy and infrastructure; their shipment numbers are up.

Shipments of notebooks were up 112 percent compared to the second quarter last year. Revenues from portables represented a historical high of 12.5 percent of total revenue in the quarter. Reporter Stephanie Miles contributed to this story.