Loss at Gateway Narrows
Computer maker Gateway Inc. said Thursday that it recorded a quarterly profit for the first time in three years -- but only because a stock transaction boosted its bottom line.
Without the $100-million gain it recorded after buying back shares, Gateway was in the red, though it narrowed its losses considerably from a year earlier. The company also reported an increase in sales.
Irvine-based Gateway reported net income in the fourth quarter of $94 million, or 25 cents a share, contrasted with a loss of $114 million, or 35 cents, in the fourth quarter of 2003.
Not counting the stock transaction, Gateway would have lost $6.6 million, or 2 cents a share.
For the full year Gateway reported a loss of $475 million, or $1.31 a share, compared with a loss of $526 million in 2003. Revenue was $3.65 billion, up 7.3%.
Once a profitable and widely admired maker of low-cost PCs, Gateway -- founded in an Iowa farmhouse -- has struggled in recent years. It lost money building up a costly network of company stores while rival Dell Inc. increased profit with a low-overhead business model selling primarily over the telephone and Internet.
The last time Gateway turned an annual profit was in 2001, when it earned $316 million on sales of $9.7 billion.
Chief Executive Wayne Inouye, who joined the company when it merged with former rival EMachines Inc. in March, credited a restructuring plan -- which included closing Gateway stores -- for the improved results.
“You look at our growth, either year-over-year or sequentially, and we’re the fastest-growing PC company in the United States,” Inouye said in an interview.
“They’ve done an enviable job, given the cards they’ve been dealt,” said Barry Jaruzelski, head of the technology practice at management consultants Booz Allen Hamilton in New York. “Management has demonstrated it’s very rigorous on the cost side. But it’s all a moving target and it’s only going to get tougher.”
Revenue was $1.03 billion, up from $875 million in the fourth quarter of 2003. PC sales were 1.2 million, more than twice the number a year earlier, thanks in part to the addition of sales of EMachines computers.
Gateway shares gained 5 cents to close at $5 on the New York Stock Exchange, and rose as high as $5.25 after hours.
For the current quarter, revenue is expected to be $810 million to $850 million, somewhat below analysts’ consensus of $897 million, according to Thomson First Call.
Gateway executives predicted a profit for the current year. “Our efforts on productivity and efficiency are absolutely paying off,” Inouye said in a conference call with financial analysts.
