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Gateway ends losing streak

But cuts FY2005 sales, earnings forecast

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Gateway went back into the black during its second quarter, the PC maker reported yesterday, ending its 13-quarter run of loss announcements.

For the three months to 30 June 2005, Gateway sold $873m worth of kit, up 4.2 per cent on both the year-ago quarter and the previous three-month period, which both yielded revenues of $838m, the company said.

Net income for the quarter came to $17.2m (five cents a share), up from the previous quarter's $5m (one cent a share) loss and the $339m loss (91 cents a share) Gateway reported this time last year.

The profit came as the cost of the company's restructuring programme following its acquisition of eMachines fell to $1m from $8m the previous quarter and $289m in Q2 FY2004.

It also included $15.1m from Microsoft, the result of a market agreement signed between the two companies in April 2005.

PC sales for the period were up seven per cent sequentially and 27 per cent year on year to just over 1m units. Three-quarter of those machines were sold through the company's retail channels, with four per cent retail unit sales growth and three per cent retail revenue growth bucking the seasonal trend, Gateway said.

However, PC sales contributed only 27 per cent to Gateway's gross margin, which rose fractionally from 9.6 per cent to ten per cent, sequentially.

The company had to "contend with gross margin pressure in all our major business units in the second quarter due to competitive pressures", company president and CEO Wayne Innouye said in a statement. Dell said much the same thing when it reported its Q3 figures last week.

Looking ahead, Gateway reduced its forecast for full-year sales from $4.0-4.25bn to $3.9-4.0bn. It also reduced its earnings forecast, from 15-17 cents a share to 11-13 cents a share. ®

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