Gateway Issues Wider Loss on Charges
{{#rendered}} {{/rendered}}Personal computer maker Gateway Inc. (GTW) Thursday posted a wider quarterly loss from a year ago due to charges but revenue rose, helped by higher sales in the professional and retail sectors.
The company, which earlier this year bought rival eMachines (search) to spur growth, also reiterated its objective of being profitable for 2005, and Chief Executive Wayne Inouye said in an interview that demand for PCs looks good for the second half of the year.
"Right now we're looking at a very healthy market," Inouye told Reuters in a telephone interview, noting that prices of components used in flat-panel displays are falling, which should spur demand for notebook PCs as well as desktops PCs. "We're going to be staring a lot of price reductions in the face."
{{#rendered}} {{/rendered}}The Poway, Calif., company said it had a second-quarter net loss of $338.6 million, or 91 cents a share, compared with a year-ago net loss of $72.6 million, or 22 cents a share. Revenue rose 5 percent to $873.6 million from $799.6 million.
Excluding charges, Gateway posted a loss of $49 million, or 13 cents, which it said was its smallest such loss in 10 consecutive quarters.
On that basis of excluding charges, analysts polled by Reuters Estimates expected the company to post a loss of 14 cents, on average, on revenue of $873.3 million.
{{#rendered}} {{/rendered}}"I'm very optimistic about our ability to meet expectations going forward," Inouye said.
Since the burst of the tech bubble in 2000, Gateway has been hit harder than its rivals and losing market share to Hewlett-Packard Co. (HPQ) and Dell Inc. (DELL)
Before buying eMachines, founder and Chairman Ted Waitt had tried to reinvent Gateway as a purveyor of consumer electronics, such as digital cameras and flat-panel TVs, in addition to being a PC maker.
{{#rendered}} {{/rendered}}Last month, Gateway said it expected to report a narrower second-quarter operating loss than expected on cost cuts and a stronger performance in the professional and retail sectors.
For the current third quarter Gateway said it expects a per-share loss before items of 7 cents to 9 cents on revenue of $900 million to $950 million.
Analysts had expected Gateway to have a third-quarter loss before charges of 8 cents a share, on average, on revenue of $933.8 million.
{{#rendered}} {{/rendered}}Chief Financial Officer Rod Sherwood said in the interview that the company had about 3,400 employees at the end of the second quarter and is on track to bring that number below 2,000 by the end of the year. That figure is down from about 8,500 employees a year ago.
He also said that costs will continue to decline.
Inouye said that Best Buy Co. Inc. (BBY) will begin carrying Gateway-branded notebook and desktop PCs in the third quarter, adding that the company is in talks with other leading retailers and will make announcements in the weeks ahead.
{{#rendered}} {{/rendered}}The company reiterated it is positioning Gateway as a high-end brand and eMachines for more value-minded consumers.
In the professional segment, revenue rose 36 percent to $318 million in the second quarter from the previous period and unit sales climbed 54 percent to 244,000.
In the retail segment, revenue climbed 82 percent to $306 million from the first quarter as PC sales climbed 96 percent to 459,000 units, fueled principally by the eMachines purchase.
{{#rendered}} {{/rendered}}Shares of Gateway fell 5 cents, or 1.1 percent, to close at $4.35 on the New York Stock Exchange before the company reported results. Year to date, the stock has fallen nearly 6 percent, compared with a 22 percent increase in the American Stock Exchange Computer Hardware Index.