Gateway has warned profits will not reach targets for the first quarter of the year, with unit sales expected to drop.

The PC vendor said it expected to break even during the quarter, before adding charges of between $150 million and $275 million.

Analysts had expected the US company to record a profit of 17 cents per share.

Gateway said the charge would be used for the possible closure of under-performing stores, and for pulling its business out of some international markets, as well as for job cuts.

It also revealed plans to change its business model - it will cut its product range and get back to its core business of flogging PCs.

Gateway chairman and CEO Ted Waitt said the company expected to break even in the first half of the year, returning to profit and unit growth in the second half.

The company, which earlier this year said it would lay off ten per cent of its workforce, has been hit by weak PC demand like much of the IT industry. It expects unit sales in the first quarter to be down slightly year-on-year.

It recorded a loss of $94.3 million for the quarter ending December 31 2000. ®

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