What the??? Gateway Says Sales Are Weak,
Threatening 4th-Quarter Results
By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
Gateway Inc. said weak demand and price pressures during the crucial Thanksgiving weekend put the personal-computer maker's fourth-quarter financial results in jeopardy.
Ted Waitt, Gateway's chief executive, said sales of desktop PCs, which make up about 60% of the company's annual revenue, are declining along with prices. He signaled another round of cost cuts next year at the Poway, Calif., company.
"There are a lot of promotions in the market, a lot of very aggressive pricing that's putting pressure on margins," he said in an address at an investors conference in Arizona.
In October, Gateway forecast fourth-quarter revenue of between $1.19 billion and $1.38 billion and a pretax loss of between 10 cents and 13 cents a share. The company earned $9 million, or two cents a share, on revenue of $1.14 billion a year earlier.
Results from the Thanksgiving weekend suggest Gateway must struggle to reach its forecasts, he said. "Probably the low end of that range is the best-case scenario," Mr. Waitt said.
He made the remarks after the halt of normal trading. Gateway declined 4%, or 17 cents, to $4.12 at 4 p.m. in New York Stock Exchange composite trading Wednesday.
As part of its review of costs, Gateway is re-evaluating its retailing efforts with an eye toward closing or relocating some of its 272 Gateway Country stores, he said.
Mr. Waitt's comments contrasted with more favorable reviews of consumer PC sales by the two largest retail PC suppliers, Hewlett-Packard Co. and eMachines Inc.
With retailers offering large rebates and steep discounts on PCs during the traditional holiday kickoff weekend, the two companies said sales have outstripped cautious expectations.
Despite Mr. Waitt's pledge to revive earnings next year, Wall Street has taken a dim view of Gateway's turnaround prospects.
Analysts forecast a 2003 loss before items of about $98 million, or 30 cents a share, according to Thomson First Call.
Write to Gary McWilliams at gary.mcwilliams@wsj.com
Updated December 5, 2002 |
