Stefan, a little OFF TOPIC: PCs and Intel,
Right now there is
no demand for faster processors as the PIII indicates.
Wrongo! Gateway report below. Now that it's also come out that PCs, overall, were 17% ahead re shipments in 1Q vs. 1Q98, and Intel has stated that PIII will 100% replace PII by EOY (in case you missed that one), what's da Bears next set of predictions? Note that Intel doesn't replace an old line with a new line unless the new one is selling very well. Also, Intel said earlier they'd keep PII MFG going for customers that feel queasy about Y2K and new platforms. Guess that Bromo isn't required much longer. When you come back with, yeah, shipments up 17% but revs up only 3%, I'll come back with 'that doesn't include PC servers, which are screaming, and are much more expensive than PCs.' If you come back with not true, I'll come back with 'Xeon is just getting started, and is replacing other platforms like Sun SPARC based servers by the boatload.' Xeon is the Intel wildcard too many people don't know about.
The company successfully launched Intel's new Pentium III chip
late in the first quarter and exited the quarter with PIII
representing 25% of US. desktop shipments.
newsalert.com.
April 27, 1999 13:39
-GATEWAY: Gateway reports strong first quarter results
Jump to first matched term
M2 PRESSWIRE-27 April 1999-GATEWAY: Gateway reports
strong first quarter results (C)1994-99 M2 COMMUNICATIONS
LTD
* Posts Robust US Consumer Growth Three Times Industry Rate
* Shipments increase 42% to 1,085,000
* Sales increase 22% to $2.1 billion
* Income increases 31% to $99.6 million $.62 earnings per diluted
share
Reflecting continued momentum across nearly all segments of its
global business, including robust 61% unit growth in its US.
consumer segment, Gateway today announced earnings results of $.62
per diluted share for the first quarter of 1999.
Gateway attributed its strong US. consumer growth, which tripled the
estimated industry consumer growth rate, to several elements: solid
execution behind its unique multi-channel strategy, including phone,
Web and Gateway Country( stores; increased investment behind
building the Gateway brand and continued focus on delivering
superior products and services, most notably through the
Your:)Ware( consumer program.
In addition, Gateway took a number of significant steps in the first
quarter to build a stronger connection to its clients through the
Internet. These steps included: launching Gateway My Yahoo!,
offering co-branded, personalised Web pages for gateway.netSM
users; providing the option to include one year of gateway.netSM
Internet access with the purchase of a computer; and investing equity
in and forming an alliance with NECX to launch
www.SpotShop.com(, Gateway's on-line peripherals store.
Gateway's strong showing in the US. consumer market in the first
quarter gives the company an estimated 25% of U. S. consumer PC
revenues, meaning one out of every four dollars spent by consumers
on PCs in the US. is spent with Gateway.
"The strategy we've been executing for the past year is paying off
with real, noticeable momentum in the consumer marketplace," said
Ted Waitt, Chairman and Chief Executive Officer. "Gateway and its
shareholders are reaping the benefits of a focused effort to expand our
client relationship beyond the box. Our consumer business has never
been stronger, and now we're positioned to expand that success into
the small and mid-sized business arena."
In the first quarter of 1999, Gateway shipped 1,085,000 PCs, a 42%
increase from the first quarter 1998. Sales increased 22% to $2.103
billion from $1.728 billion a year ago. Net income increased 31% to
$99.6 million or $.62 per diluted share compared to $75.9 million or
$.48 per diluted share in the first quarter of 1998.
Quarterly Sales
Gateway's strong quarterly sales were driven by two key factors:
substantial growth in the US. and continued momentum in Asia
Pacific.
In the US., unit volume increased 42% over the comparable period in
1998, with revenues up 23%. Gateway's US. consumer business
showed particular strength, with robust unit growth of 61% and
revenue growth of 38%. In Gateway's US. business segment, units
increased 23% over last year and revenues were up 6%.
Additionally, Gateway showed dynamic growth in Asia Pacific,
where total unit volume increased 96% over 1998 and revenues grew
65%. Japan posted particularly strong gains in the face of continued
macro economic challenges, and new and emerging markets also
showed significant growth.
Gateway's European region continued its turnaround, with first
quarter consumer unit volume in the region posting a 23% gain over
the same period last year, and revenues up 1%. The United Kingdom
consumer segment showed a strong 32% increase in unit sales in the
first quarter, with revenues up 13%. However, due to softness in
Europe's business market, unit growth across the region in all
segments was flat and revenues were down 13%.
Desktop unit growth was up 42% versus first quarter last year, with
revenues up 23%. Portable unit volume was up 47% over the same
period last year, with revenues up 23%. The company successfully
launched Intel's new Pentium III chip late in the first quarter and
exited the quarter with PIII representing 25% of US. desktop
shipments.
Average unit prices (AUPs) declined 3% to $1,938 from $2,003
reported for the fourth quarter of 1998. AUPs declined 14% from
$2,253 in the first quarter of last year.
Finally, Gateway Country( stores expanded to 154 stores in the US.
with the addition of 10 new stores in the first quarter.
"From a top-line perspective, the first quarter was one of our best
ever," said Jeff Weitzen, President and Chief Operating Officer,
"We're connecting everywhere, all around the world. Whether it's on
the Web or up and down the street, we're demonstrating time and
again that we've built an unparalleled ability to respond to peoples'
technology needs in a truly personalised way."
Gross Margin Levels
Pricing discipline focused vendor management, healthy overseas
margin performance, solid execution and a richer product mix, all
contributed to strong overall margin performance in the quarter.
Gross margins for the first quarter were 21.4 %, up from 19.5% last
year and essentially flat compared to 21.6% in the fourth quarter of
1998. This represents the fifth consecutive quarter of year-over-year
margin improvement for Gateway.
Selling, General & Administrative (SG&A) Expenses SG&A
productivity in the first quarter was offset by continued strategic
investment across a number of fronts, including systems
infrastructure, the Internet, Gateway Country( stores and international
expansion. SG&A spending totalled $309.7 million or 14.7 % of
sales for the first quarter, compared to $227.3 million or 13.2% of
sales in last year's first quarter, and down slightly in total spending
from $310.6 million or 13.5% of sales in the fourth quarter of 1998.
Operating Income up 29%
Operating income for the first quarter totalled $140.8 million, up
29% from $109.2 a year ago. Other income increased 58% to $14.8
million compared to the first quarter of 1998, due to increased
interest income.
Net Income increased 31%
Net income increased to $99.6 million compared to last year's first
quarter level of $75.9 million, a 31% growth rate over last year.
Earnings per diluted share increased 29% to $.62 from $.48 per
diluted share a year ago.
Cash & Marketable Securities at $1.273 Billion Level
Cash and marketable securities ended the quarter at $1.273 billion.
Net cash generated by operations in the first quarter totalled $134
million, driven by strong working capital performance. The slight
decrease in cash levels from the fourth quarter is principally due to
the stock buy-back program of 700,000 shares totalling $55 million,
and the purchase of a 19.9% interest in NECX. Strong inventory
management programs once again resulted in record highs for the
company. Inventory turns were 40 compared to 26 a year ago and 40
last quarter. The cash conversion cycle remains strong at negative 3.2
days. The effective tax rate for the quarter was 36%.
Business Outlook
"Moving ahead, we're focused on maintaining our strong momentum,"
said John Todd, Senior Vice President and Chief Financial Officer.
"We're marshalling the resources and talent needed to continue
delivering consistent financial performance in the seasonally
challenging second quarter and beyond."
At the beginning of the second quarter in the US, Gateway announced
the launch of the Your:)Ware for Business program, an expansion of
its popular Your:)WareSM consumer program, tailored for small
businesses. The Your:)Ware for BusinessSM program provides
customised solutions, one-to-one account management and an
innovative technology refresh program for small and medium sized
businesses. The new program, coupled with localised sales, service
and training that the company offers through its Gateway Country(
stores, promises to significantly expand Gateway's presence in the
business arena.
"The small business segment is a huge, untapped opportunity for us,"
Weitzen said. "We still have a lot of work to do, but with our
Gateway Country( stores and unmatched, personalised service, we
think we're positioned better than any other player in the
marketplace."
Going forward, Gateway intends to succeed by remaining on the
cutting edge of technology personaliSation across all channels and
segments of its business.
"There's no denying that the PC business continues to be very
competitive, and not just on pricing," Waitt said. "But, as we've
demonstrated in the first quarter, our unique route to market is built to
succeed in this environment. More importantly, we intend to continue
leading the industry in delivering technology that's custom-fit to our
clients' needs."
Annual Meeting
The 1999 Annual Meeting of shareholders of Gateway will be held
on May 20, 1999, at the Sioux City Convention Center, 801 Fourth
Street, Sioux City, Iowa, at 9:00 a.m. local time. The meeting will
also be broadcast on Gateway's Web site,
www.gateway.com/annualmeeting.
Special Note
The above statements include forward-looking statements based on
current management expectations. Factors that could cause future
results to differ from these expectations include the following:
general economic conditions; growth in the personal computer
industry; competitive factors and pricing pressures; component supply
shortages; risks relating to new or acquired businesses; and inventory
risks due to shifts in market demand. Additional factors are described
in the Company's reports filed with the Securities and Exchange
Commission.
1. According to 1997 Technology User Profile from ZD Intelligence,
announced in the spring of 1998, 75% of Gateway clients who bought
a new computer in 1997 repurchased a Gateway system. 2. According
to Gartner Group/Dataquest US PC Quarterly statistics.
About Gateway
Gateway (NYSE: GTW), a Fortune 500 company founded in 1985, is
a leading global direct marketer of PC products. The company has
manufacturing facilities in the United States, Ireland and Malaysia
and employs more than 19,000 people worldwide. Gateway products
and services consistently win top awards from leading industry
publications. Revenue for the year 1998 was $7.5 billion. For further
information, visit Gateway at gateway.com.
About Gateway Europe, Middle East & Africa
GATEWAY began its European operations in 1993 when it opened
its manufacturing plant and European, Middle East and Africa
headquarters in Dublin, Ireland. Today, the company is firmly
established throughout Europe and sells into Austria, Belgium,
France, Germany, Luxembourg, Ireland, the Netherlands, Sweden,
Switzerland, the UK, Middle East and Africa. For further
information, visit the GATEWAY website at
gateway.com.
For further client information, please contact:
Gateway Europe, Clonshaugh Industrial Estate, Dublin 17, Ireland -
0800 55 2000 - www.gateway.com/uk
Gateway, the stylised Gateway logo, Gateway Country and
Your:)Ware and Your:)Ware for Business are trademarks or
registered trademarks of Gateway 2000, Inc.
CONTACT: Amanda Fenner Tel: +44 (0)181 242 4103 e-mail:
amandaf@text100.co.uk Phillipa Cook Tel: +44 (0)181 242 4128
e-mail: phillipac@text100.co.uk
*M2 COMMUNICATIONS DISCLAIMS ALL LIABILITY FOR
INFORMATION PROVIDED WITHIN M2 PRESSWIRE. DATA
SUPPLIED BY NAMED PARTY/PARTIES.*
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