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Gateway in PC price war gloom

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Gateway issued a profits warning yesterday after failing to lift sales of PCs over the Thanksgiving weekend. It also warned of an imminent price war in the sector, pointing to high inventory as a cause.

The company said it would not meet analysts' forecasts for the quarter, now expects to report revenues of $2.55 billion - a full half a billion below forecast figures. It could even post a net loss after an exceptional charge of about $200 million is taken off its profits.

Shares in the group plummeted 36 per cent after the warning.

Traditionally, the US PC market gets a retail boost at Thanksgiving which holds up until Christmas. PC makers have been known to make up to 50 per cent of their revenue in this period.

However, Gateway CFO John Todd said there was nothing in Gateway's performance that would give him confidence for that kind of performance. "We just didn't get that spike up," he said.

In a conference call with analysts, he said: "Clearly we think in Q1 there will be an aggressive sort of price war. People are going to have to be aggressive to get the inventory out."

Jeffrey Weitzen, CEO at Gateway, blamed a general slow-down in the US economy and lowered consumer confidence.

The warning also had a knock-on effect on Gateway's competitors: Compaq, Hewlett-Packard, Apple and Dell. ®

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