Gateway Shares Drop 15% on Disclosure of SEC Probe

Shares of personal computer maker Gateway Inc. dropped 15% Friday after the company disclosed that the Securities and Exchange Commission is investigating its financial reporting from 2000, the last time it showed a full-year profit.

The probe began in December 2000 and “appears to be focused on past activities,” Gateway said late Thursday in a statement and a quarterly regulatory filing.

Shares of the Poway, Calif., company dropped 63 cents to $3.56 on the New York Stock Exchange.

The inquiry, which could conclude by March, probably focuses on the same issues that led Gateway to restate its 2000 results in February 2001, the company said.

That restatement and simultaneous changes in accounting policies dropped the net income for 2000 by $74.5 million to $241.5 million.

Most of the adjustment was from a bigger write-down for investments in technology companies. Smaller factors included the correction of accounting irregularities at a foreign subsidiary, an issue of revenue recognition and increased reserves for loan losses. Gateway said it didn’t expect the probe to have a material effect on the company’s financial position, and it said it had settled shareholder lawsuits stemming from the restatement with insurance policy proceeds.

Analysts were unhappy both with the investigation and with the timing of the news.

“We are somewhat perplexed by Gateway’s decision to wait to disclose the investigation for nearly two years,” Banc of America Securities analyst Joel Wagonfeld wrote to clients Friday.