Gateway US sales fall

September 11 blamed

By Drew Cullen, 5th October 2001

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Gateway is in the mire.

The Pan-US PC maker issued a profit warning yesterday, saying it will lose more money than previously expected in Q3, because of September 11. The attacks have hurt demand, the company says.

"We saw a pretty significant impact to our demand in the consumer segment. We saw impact to our demand in the government segment, as well as in the business segment." CEO Ted Waitt said in a conference call.

Analysts had expected a loss of 4 cents per share; Gateway says it will now loss 14-17 cents per share. The company is to take a charge in the quarter of $100m-$130m to write down equity investments.

Demand has returned to pre-September 11 levels, according to Waitt, who forecasts the company will still make profits, before charges in Q4.

Gateway is not alone in pegging a profits warning to Sept 11. Compaq and HP have been caught up in the aftermath too. But not Dell. Yesterday, it too released a trading statement which revealed that it was not re-adjusting its expectations post-September 11. Which means that there has to be plenty of gouging on market share.

Gateway to the US

Gateway has had an awful time recently, pulling out of Europe and Asia Pacific, although it remains the fourth or fifth biggest PC supplier in the US.

The company ends the quarter with $850m+ in the bank, but a few more quarters like the one just passed and there won't be much left in the kitty. The company is certainly much smaller and weaker financially than its main rivals - Dell, HP/Compaq and IBM. And it is less nimble than smaller system builders, supplying the so-called white label market.

Gateway's strategy to claw more margin by selling services also fails to convince. Without PCs - made at profit - the company is nothing. ®