Gateway Sinks After Q1 Loss

Gateway (NYSE: GTW) fell 42 U.S. cents to $17.60,after reporting a first-quarter loss that included restructuring charges. Charges are planned for the next two quarters as well.

“We’re making solid progress against our revitalization plans,” saidchairman and chief executive officer Ted Waitt. “In order to get ourbusiness in fighting form for the second half of 2001, we’re moving withspeed and aggressiveness to make the appropriate operational improvements toour business now.”

The San Diego, California-based computer maker said that sales for the quarterended March 31st fell 15 percent from a year earlier, to $2.03 billion.

Thenet loss totaled $503 million, or $1.56 per share, compared with net incomeof $120 million, or 36 cents, in the same period last year.

Latest-quarter results included $533 million of pretax restructuring chargesand a $24 million charge for an accounting change.

Gateway said it sold 1.1 million computers during the quarter, down 12percent from a year earlier and 14 percent below the fourth quarter. Consumer revenue from the U.S. fell 19 percent from a year earlier, while sales tobusinesses rose 6 percent.

European operations saw a 38 percent year-over-year revenue drop, whileAsia-Pacific revenue declined 32 percent.

Gateway said that it expects to break even from continuing operations, excludingspecial charges, for the second quarter, even with sales that are “downslightly” from year-earlier levels.

Unit sales should rise during the secondhalf, the company said, adding that it expects a profit from continuingoperations for the latter part of 2001.

Second- and third-quarter results, however, will continue to reflectrestructuring charges associated with the closing of underperforming retailsales, cutbacks in overseas markets and other cost-cutting moves. Thecompany said it expects pretax charges of $25 million in the second quarterand $10 million in the third.

“We’re taking advantage of the current demand environment to take thenecessary steps to get our business back in shape for the second half of theyear,” Waitt said. “While our revenue performance in the quarter wasnegatively impacted by our own strategic decision to focus on moreprofitable revenue streams going forward, this is a strategy that shouldyield healthier shareholder returns both now and in the future.”