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Moody's downgrades Gateway credit status

Junk status

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Moody's has downgraded its credit assessment of Gateway to junk status, following worse than expected Q4 sales reported by the pan-US PC maker.

Gateway has been demoted to Ba-3 from Baa-1, meaning that the company is now below investment grade. This should have no material effect on Gateway, which still has plenty of cash in the bank.

But, Moody's assessment does reflect increasing concern in the investment community over Gateway, which appears to be losing share in its core US retail PC market. On Monday, the company said it would make a profit - bar one-offs and special items. However sales were only $1.16 billion, well below US analyst forecasts of $1.39bn for Q4, and 15 per cent below Gateway's own internal targets.

Rival manufacturers appear to have done rather better in Q4, with a surge in consumer PC sales in the US in December. Fuelled by low-interest deals, US PC sales through the retail sector jumped 101 per cent each week after Thanksgiving, according to investment bank Salomon Smith Barney. This compares with rises of 40-60 per cent a week in the run up to Christmas 2000, a truly terrible period for the US PC industry. ®

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