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Technology Stocks : Gateway (GTW)

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To: MJ who wrote (7536)	5/24/2000 4:04:00 PM
From: D. Swiss	Read Replies (2) of 8002

GTW conf call summary: 02:18pm EDT 23-May-00 Montgomery Securities Intl. (King, Kurtis) GTW: Gateway CFO on Supply Environment We held a conference call this morning with GTW's CFO, John Todd, regarding the component supply environment. Replay # is 800/839-2871. No code required. Todd is comfortable with consensus $2.15B revs and $0.36 EPS for 2Q. Supplies are tight but look like a 'limit on upside' for GTW versus a downside risk. We believe GTW's corporate segment should return to year/year growth in month of June, after declining (as expected) in April and May. Intel processor shortages are far and away GTW's current supply problem. GTW expects to double its AMD mix this quarter due to Celeron chip shortages. Todd said GTW will get 80K Celeron chips this quarter but could sell double that. Gateway can shift about half of unmet demand over to AMD but not more because of board constraints likely related to its unexpectedly quick AMD ramp-up. Top five vendors best off in current environment. Todd confirmed our take that smaller vendors are suffering on allocations at the expense of the leaders in the face of current shortages. GTW has been approached by smaller PC manufacturers seeking to OEM boxes because of parts shortages. Tight supplies have so far been a slight positive for GTW's gross margins. GTW will raise price on one Celeron configuration from $899 to $999 effective tomorrow because of shortages. DRAM pricing is currently stable and availability is good. GTW is planning for higher DRAM prices in 2H but Todd said processor shortages are a reason why DRAM prices may not go up. Capacitors are also in short supply but issue is moot for GTW given processor shortages. Results out of first 35 OfficeMax stores have been positive ASPs slightly above GTW's corporate average, or about 3x OfficeMax's average ex-GTW. Gross margins in line with Country Stores. Gateway is the leading direct marketer of consumer PCs in the United States, second to Dell worldwide. Gateway's strategy is based on quick time-to-market with new technologies and aggressive pricing. Gateway has succeeded in building a franchise in the consumer and SOHO (small office/home office) markets among technically savvy power users, growing revenues from just over $1 billion in 1992 to $7.5 billion in 1998. Gateway's unit mix is roughly 90% desktops, 9% notebooks and 1% servers. :o) Drew

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