Gateway’s Loss Grows 20% in 2nd Quarter
Computer maker Gateway Inc. said Thursday that its second-quarter loss widened 20% despite increased sales of electronic items beyond its conventional lineup of PCs.
The Poway, Calif.-based company lost $73 million, or 22 cents a share, compared with a net loss of $61 million, or 19 cents, in the same period last year. Revenue was $800 million, down from $1 billion a year earlier.
“We’re pleased with the progress we’re making in transforming from a traditional PC company,” said Ted Waitt, Gateway’s founder and chief executive. But, he added, “we have a lot of work to do.”
In a conference call with analysts, Chief Financial Officer Rod Sherwood said Gateway would return to selling low-end desktops “to enhance the company’s efforts to return the PC business to profitability.”
That’s a key part of the strategy to boost PC sales and to draw more customers into Gateway’s 192 retail stores, which the company is filling with an ever-increasing amount of gadgetry, including digital cameras and portable miniature memory devices.
Such product introductions accelerated this month, with new Gateway-branded large plasma televisions, smaller TV-computer monitors, DVD players and home theater systems.
“That part of the market could prove to be fairly lucrative” as the economy recovers, said Rob Enderle, a technology analyst with Forrester Research who does not own technology stocks. “Gateway’s betting ... they’ll be like the Sharper Image, where people went to get cool technology.”
Sales of items other than PCs have become increasingly important to the company’s bottom line. Non-PC revenue in the second quarter accounted for 28% of Gateway’s overall sales, up from 19% a year earlier.
Faced with relentless price competition from industry leaders Dell Inc. and Hewlett-Packard Co., Gateway is slashing costs. Since March, it has shuttered 80 stores and cut 1,900 jobs. The company is on track to realize $400 million in cost savings this year, Sherwood said.
Gateway has been able to maintain its cash position of slightly more than $1 billion and expects to finish this year at that level, he added.
Gateway shares, which dropped 11 cents to $3.68 on the New York Stock Exchange on Thursday, rose to $3.80 in extended trading after the earnings report.
