Gateway Busts Out With Strong Q3
By Mike Trigg (TMF Tonto)
October 13, 2000
Personal computer (PC) maker Gateway (NYSE: GTW) announced earnings in line with Street expectations after the market's close yesterday, citing strong consumer and small business sales and continued growth in Europe. After warnings from stalwart technology firms Intel (Nasdaq: INTC), Dell (Nasdaq: DELL), and Apple (Nasdaq: AAPL) sent PC stocks tumbling in recent weeks, the news was an affirmation of the company's beyond-the-box business strategy.
Gateway reported fiscal third-quarter (ended September 30) net income of $152.6 million, or $0.46 per share, compared to $113.2 million, or $0.35 per share, one year ago. A quick look at profits shows this was its third consecutive quarter of 30%-plus net income growth.
On the revenue side, the San Diego, Ca. company reported sales of $2.53 billion, an increase of 16% from $2.18 billion in the same period a year ago. As a percentage of sales, gross margins improved one percentage point from the year-ago period to 23.1%. Here, we begin to see the effect of the company's strategy of diversifying its product offering.
More than 50% of sales from the quarter came from hardware, software, and services other than the PC. This exceeded company expectations, which called for 45% by the end of the fourth quarter. By gaining traction with its beyond-the-box strategy, the company sets itself up for further margin expansion. Non-PC products and services are high-margin businesses, thus allowing a greater proportion of sales to trickle down to the bottom line. CFO John Todd discussed this subject in the conference call last night, noting the company sees a day when the majority of revenues come from products and services outside the box.
Internationally, revenues in the Middle East, Europe, and Africa increased 13%. The company indicated that, without currency difficulties, top-line growth would have seen a 27% year-over-year improvement. Moreover, Gateway's Asia Pacific arm saw an 8% growth in revenue and was adversely affected by problems with suppliers of disk drives, which have since been solved.
This quarter was especially good for Gateway. Next quarter is typically its strongest, and the company is comfortable with the consensus estimate calling for 48% profit growth. The consumer segment and software revenue related to the PC will continue to drive growth in coming quarters.
News to Go
Internet router provider Juniper Networks (Nasdaq: JNPR) announced fiscal third-quarter net income of $58.2 million, or $0.17 per share, compared to a loss of $1.6 million, or $0.01 per share, year-over-year. The Street consensus called for the company to earn $0.09 per share. Revenue was $201.2 million, a 78% sequential increase. CEO Scott Kriens cited strong demand among service providers to handle the increased amount of Internet traffic. The company directly competes with Cisco (Nasdaq: CSCO) and is gaining serious market traction in the space, which apparently hasn't been affected by the technology slowdown.
Data availability software provider Veritas (Nasdaq: VRTS) reported better-than-expected earnings after the market's close yesterday, citing continued international strength, steady revenue, and market share growth in the Windows NT space, and expansion of its Unix business. Veritas' fiscal third-quarter net income excluding adjustments was $70.3 million, or $0.16 per share, compared to $38.9 million, or $0.09 per share, a year ago. The Street consensus called for the company to earn $0.14 per share. CFO Ken Lonchar added in a prepared release that the company continues to see strong growth of its Hewlett-Packard (NYSE: HWP) business.
Internet advertising company DoubleClick (Nasdaq: DCLK) announced third-quarter earnings after the close yesterday in line with Street expectations. The company's net income totaled $3.7 million, or $0.03 per share, versus a loss of $3.8 million, or $0.03 per share, in the year-ago period. Revenues were $135.2 million, compared to $75.3 million. Specifically, the media unit reported revenue of $64.3 million, an 86% increase. The number of advertisers fell 10% from the prior quarter. Moreover, it maintained a bearish outlook for the rest of the year, adding that current conditions likely won't change till the second quarter of next year.
Communications chip maker PMC-Sierra (Nasdaq: PMCS) reported that fiscal third-quarter profits had tripled, citing strong sales to makers of computer networking gear. The company also forecasted that sales would rise 15% in the next period. Net income excluding onetime items was $56 million, or $0.31 per share, compared to $18.7 million, or $0.11 per share, year-over-year. The Street consensus called for $0.26 per share. Revenue came in at $198.1 million versus the year-ago figure of $82.5 million. The company added a number of acquisitions in order to expand its broadband and communications expertise and serve larger markets this quarter. Purchases include Malleable Technologies, Quantum Effect Devices, and Datum Telegraphic. |
