Gateway Narrows Loss to $5 Million

Computer maker Gateway Inc. said Thursday that it considerably narrowed its quarterly loss and almost broke even on a per-share basis as it gained share in the retail market and continued to cut costs.

Gateway posted a first-quarter loss of $5 million, or a penny a share, compared with a loss of $172 million, or 51 cents, a year earlier, when it acquired computer maker EMachines Inc. The Irvine-based company now sells computers under both brands, with EMachines at the entry level and Gateway selling premium computers.

Sales fell 3.5% to $838 million.

Gateway is on track to record a per-share net profit for the year of 15 cents to 17 cents on revenue of $4 billion to $4.3 billion, Chief Financial Officer Rod Sherwood said. Sales for 2004 were $3.7 billion.

Gateway’s results were bolstered by strong sales of notebook computers through its retail channels, although its direct business of selling to customers over the Internet and by telephone was a bit weaker, Sherwood said. The professional business, or sales to companies, schools and government agencies, “is holding its own.”

Gateway has spent a year restructuring to try to get into the black, slashing costs by reducing workers, closing all its factory retail stores, getting out of most consumer electronic products and selling its computers, digital music players and television sets through retail chains.

Chief Executive Wayne Inouye, who joined Gateway from EMachines after the acquisition, said he had hit all the milestones he had set out, including creating a “world-class cost structure” in a cutthroat market.

Gateway shares rose 3 cents to $3.48 on the New York Stock Exchange. They were little changed in after-hours trading after the earnings announcement.