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News > Technology
Gateway sees 3Q shortfall
October 4, 2001: 6:08 p.m. ET

PC maker reins in second-half profit goal, cautiously optimistic on 4Q profit
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NEW YORK (CNNfn) - PC maker Gateway on Thursday warned that its third-quarter loss will be much wider than previously expected.

Pointing to a sharp decline in demand in the wake of the Sept. 11 terrorist attacks on the United States as the principal reason for the shortfall, Gateway said it expects to report a loss ranging between 14 cents and 17 cents per share for the quarter ended Sept. 30.

Previously, analysts generally had expected Gateway to lose 4 cents per share, according to a survey conducted by earnings tracker First Call. The company did not provide estimates for revenue or gross margins. It is expected to report its results on Oct. 18.

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Gateway (GTW: Research, Estimates) reaffirmed its expectation to return to operating profitability in the fourth quarter, with domestic unit sales increasing sequentially. But that profit is not likely to be enough for the entire second half of 2001 to be profitable, as it previously expected, the company said.

In a teleconference with analysts Thursday evening, executives of Gateway said all segments of their business had been adversely affected following the terrorist attacks. Ted Waitt, the company's chairman and CEO, said the company's business before Sept. 11 had been tracking according to expectations, and has returned to normal levels.

"We're continuing to see consistent demand across all segments now," Waitt said.

The smallest of the U.S.-based PC vendors, Gateway already had been especially hard hit by a fierce pricing war as well as a sharp decline in demand for PCs.

In late August, the company announced plans to cut its global workforce by 25 percent and said it began exiting the overseas market altogether.

Gateway also has put in place a restructuring plan under which it will concentrate on six lines of business: hardware; communications; applications; learning; financing; and services.

At that time, the company said it expected to record a $475 million charge for the restructuring in the third quarter. On Thursday, they said they would record an additional charge of between $100 million and $130 million due to declines in the value of some of its investments.

Earlier this week, Compaq Computer (CPQ: up $0.20 to $8.85, Research, Estimates) also warned of a wide earnings miss, blaming them in large part on transportation disruptions in the wake of the terrorist attacks, saying that they put a kink in the company's supply-chain management.

Earlier on Thursday, executives of Dell (DELL: up $1.68 to $22.32, Research, Estimates), the No. 1 PC maker, stood by its previous estimates and said the there had been very little disruption to their supply chain as a result of the attacks. They also said production and demand rebounded more quickly than expected and they are winning new customers at a rapid rate.

Joe Burke, Gateway's chief financial officer, also said Thursday that there had been no significant impact from supply-chain disruptions. "It was more demand issues," he said.

Burke said he was "cautiously optimistic" about Gateway being able to achieve an operating profit in the fourth quarter. He also said that the company's cash balance exceeded $850 million as of Sept. 30 and its liquidity position continues "to be strong" despite weaker-than-expected sales. graphic

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.