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Gateway revenue warning scares off investors

Branded integrator branded

Struggling branded integrator Gateway saw its shares slump during Tuesday's trading as investors reacted to a profit warning and analysts cut their ratings on the company.

On Monday, Gateway lowered fourth quarter revenue forecasts to $880 million from a previous prediction of between $925 million and $975 million. This revelation prompted investors today to dump Gateway shares with the company's stock falling more than 12 percent to $4.35, at the time of this report. Analyst firms including Bear Stearns and Soundview trimmed their ratings on Gateway.

Gateway is trying to revive its business by moving away from a dependance on PC sales. It has started selling digital TVs, cameras and other consumer electronics goods - what the company colorfully calls its branded integrator strategy.

Putting a brave face on its revenue forecast cut, Gateway pointed to strength in these new areas as reason for optimism in the long haul. Digital camera unit sales rose 200 percent quarter-on-quarter and TV revenue jumped 20 percent.

"The company's positive performance, however, was partially offset by other factors, primarily: constrained supply for the company's 610 Media Center PC, its FMC-901 Family Room Media Center PC and HDTV models; and increased competitive PC pricing promotions that impacted Gateway's ability to drive demand in certain PC segments, particularly the notebook and low-priced desktop categories," Gateway said in a statement.

Gateway will report full fourth quarter details on January 29.®

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