Gateway Loss Widens, PC Shipments Drop
Thu Apr 17, 7:21 PM ET
story.news.yahoo.com
By Duncan Martell
SAN FRANCISCO (Reuters) - Gateway Inc. (NYSE:GTW - news) on Thursday reported its ninth loss in 10 quarters as the No. 3 U.S. personal computer maker labored under weak demand for technology and stiff competition from larger rivals.
In the first quarter, according to figures released by market researcher International Data Corp., Gateway again lost market share, shipping 506,000 units in the period in the United States, down from 645,000 in the year-ago period, representing a 4.3 percent share, down from 5.6 percent.
"If you look at the unit shipments, it's not a good pattern," said IDC analyst Roger Kay.
Gateway said its first-quarter loss including a charge of $78 million widened 58 percent to $200 million, or 62 cents a share, from $126.2 million, or 39 cents, a year ago. Revenue fell to $844.5 million from $992.2 million.
Chief Financial Officer Rod Sherwood said in an interview that excluding the charge, on an after-tax basis, Gateway's loss was 38 cents a share.
Analysts had forecast a per-share loss of 40 cents excluding any charges, with a range of a loss of 37 cents to a loss of 41 cents, on revenue of $838.3 million, according to tracking firm Thomson First Call.
SHIFTING TOWARD PRICIER PRODUCTS
Gateway, which is seeking to stabilize its business by selling plasma displays and televisions and other consumer electronics gear, in March warned that its first-quarter results would fall far below analysts' forecasts. It said it would slash its work force by 17 percent, or 1,900 positions.
"The competitive intensity is still high but I don't think it has changed markedly from fourth-quarter levels," Sherwood said.
Tough competition from both Dell Computer Corp. (Nasdaq:DELL - news), the world's biggest PC maker, and Hewlett-Packard Co. (NYSE:HPQ - news), the No. 2 maker of PCs. Those two have been swapping the crown of biggest PC maker since HP bought Compaq last May.
Gateway, based in Poway, California, generated $165 million in cash during the quarter.
Gateway's corporate consumer PC business was "marginally profitable," Sherwood said, adding that for the entire year it expects that unit to be profitable. Its consumer PC business is not yet profitable, but Sherwood said there are improvements on the horizon in that area.
"We're taking steps designed to improve profitability over the course of the year and we would like to get it to the point where various segments or channels are profitable or near profitable," Sherwood said.
The company also said that its average unit price, total net sales divided by PC units, rose to $1,670, the highest level since the first quarter of 2001.
In the first quarter, Gateway sold 506,000 PCs, down 30 percent from the fourth quarter and down 22 percent from the year-ago period. Gateway said the fall in PC sales is mostly due to a shift in focus by Gateway to more expensive PCs.
Sales of non-PC products and services were 24 percent of revenue, up from the prior quarter's 17 percent and the year-earlier figure of 20 percent.
Gateway also noted that, as it had previously indicated, it expects to cut annual selling, general and administrative expenses this year by $125 million to $200 million annualized and to decrease cost of goods sold by $200 million this year.
Shares of Gateway rose 3 cents, or 1.3 percent, to $2.42 on the New York Stock Exchange (news - web sites). Year-to-date, the stock has declined 23 percent. |
