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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: OLDTRADER who wrote (150532)	1/6/2000 1:13:00 PM
From: Mark Duper	Respond to of 176387

what the hell does that mean?

To: OLDTRADER who wrote (150532)	1/6/2000 2:51:00 PM
From: Mark Duper	Read Replies (1) \| Respond to of 176387

Wall Street, Overlooking Shortfall, Rewards Gateway for Openness By Eric Moskowitz Senior Writer 1/6/00 2:21 PM ET Gateway (GTW:NYSE - news) can attest that honesty is indeed the best policy. PC investors and analysts mostly ignored Gateway's bad news Thursday, betting that the company's fourth-quarter earnings shortfall -- stemming from a sharp decline in business PC sales and a processor shortage -- doesn't portend hard times for it or the rest of the industry. Gateway shares, which had fallen sharply in after-hours trading Wednesday following the announcement, rebounded Thursday, jumping 9% to around 60 as analysts issued positive comments. Shares of other leading computer makers were narrowly mixed in a subdued market. In part, the episode once again points up the importance of companies' relations with Wall Street. Once upon a time, Gateway was punished in the market for not giving the Street advance notice on an earnings shortfall. But this time around, analysts and investors were sanguine that the problems in Gateway's quarter were indeed of the one-time variety. And they lauded Gateway's newly minted management for its handling of a potentially tricky problem. Fear Itself Investors initially worried that Gateway's comments meant the industry would suffer a shortage of Intel (INTC:INTC - news) chips. That could hit fourth-quarter earnings and, by extension, the stocks of PC concerns including Hewlett-Packard (HWP:NYSE - news), Dell (DELL:Nasdaq - news) and Compaq (CPQ:NYSE - news), all of which are heavily dependent on Intel chips. With the tech sector shaky in recent days, the possibility of another big retreat on the Nasdaq loomed. But Gateway's management was quick to emphasize with analysts Wednesday evening that its problems were one-time in nature, and the company reiterated that it was comfortable with earnings estimates for coming quarters. "We don't believe we have systemic issues here," said new Gateway CEO Jeff Weitzen. Analysts took the bait, generally lowering their Gateway earnings estimates for this year but maintaining buy ratings. "We would be buyers of Gateway stock on weakness," Salomon Smith Barney analyst Rich Gardner told clients Wednesday. Gardner has a buy rating on Gateway and his firm has done no company underwriting. Different Strokes Gateway's new management team had a great 1999, boasting a stock that more than doubled for the year. But the San Diego, Calif.-based PC direct seller hasn't always had the reputation of being up front with analysts. Months before Gateway CFO John Todd took over in October 1998, Gateway warned that its second-quarter earnings would miss estimates by 6 cents a share. Blindsided by the surprise, analysts downgraded the stock en masse, sending it down 21%. Gateway's CFO at the time, John McKittrick, wasn't communicating with sell-siders properly, according to Banc of America's Kurt King. Todd says he has been honest with the Street, and as soon as he saw the problem forming -- three business days after the quarter ended -- he acted. "I told analysts if I see an issue that will impact the quarter, I'm not going to wait until the conference call," he says. Weitzen said the chip-supply issue will be resolved in the next few days with what will probably be a deal with Advanced Micro Devices (AMD:NYSE - news), a chip supplier Gateway dropped from its roster last summer. "It was a frustrating quarter because the company never knew when it was going to get the chips," continued Todd. The Other Side Of course, one school of thought is that perhaps Gateway's miss hasn't upset this market because the Street doesn't put as much stock, pardon the pun, in Gateway, says Jeff Matthews, a money manager with Ram Partners. "If Intel or Dell had preannounced, it would have been more of a shock," says Matthews, who is short Dell. And not all observers were soothed by Gateway's remarks. Piper Jaffray analyst Ashok Kumar, who stuck a price target of 55 on Gateway in early December when it was trading at 70, says customers are opting to buy lower-margin Celeron chips over Pentium IIIs. "This is a more alarming and secular trend for a consumer-centric vendor like Gateway," says Kumar, who has a buy rating on Gateway. His firm has done no Gateway underwriting. No one knows what's going to come after the Taiwan earthquake and Y2K, but the fact that there always seems to be something else has to be troubling to PC investors. Earthquakes, lockdowns and PC component supply and demand issues all have kept investors wary of PC stocks over the long term. And for Gateway investors, assurances that the bad news is over will be remembered only if they are wrong. But for now, that's good enough.