Gateway stems loss even as sales slide

Beats Street

Gateway beat Wall Street expectations when it yesterday announced a net loss of $73 million for its second quarter (22 cents a share). Analysts had been expecting a loss in the region of 28 cents a share.

Gateway put the difference down to the results of a cost-cutting programme and "steadily increasing sales of higher margin non-PC products" such as plasma TVs. It knocked $48 million off its costs of goods sold during the quarter, above its target of $35-40 million, the company said.

This time last year, the PC maker lost $61 million (19 cents a share). Last quarter, its loss hit $200 million (62 cents a share), though that figure included a $78 million restructuring charge.

Before taxes, Gateway lost $70 million, 25 per cent lower than the $93 million it lost during Q2 2002 and 42 per cent lower than in Q1 - 65 per cent if you include the restructuring charge.

Gateway said it Q2 results, particularly net loss and earnings per share, do not reflect a benefit from income taxes included in last year's comparable quarter results.

The company reported revenues of $800 million for the quarter, down five per cent on the previous quarter and 20 per cent on the $1 billion it reported this time last year. Some 28 per cent of the most recent quarter's revenue came from non-PC lines, up from 24 per cent in Q1. PC sales were down three per cent sequentially and 25 per cent year on year.

"This decline was due primarily to the effect of previously announced store closures late in the first quarter and the company's stated focus on mid to higher end PC sales," Gateway said. The company has begun a programme to revitalise its retail stores, and will move back into the low-end PC market in the coming weeks.

Looking ahead, the company said is its "comfortable" with analysts' expectations of Q3 revenue of $874 million, rising to $954 million in Q4. It is sticking by its previously announced statement that it will lose around 19 cents a share during Q3 and nine cents a share in Q4. ®