Contracts Boost Gateway Shares
Gateway Inc. shares rose Tuesday after the computer maker received contracts to supply equipment to California government agencies.
Also fueling the gain was a bullish research note Tuesday from Piper Jaffray, which said improved performance at Gateway’s professional unit helped make its shares a bargain at “current depressed levels.”
The shares rose 22 cents, or 6.7%, to $3.49.
Irvine-based Gateway is one of five vendors that will share in California state contracts together worth an estimated $116 million. The contracts were announced Friday by the California Department of General Services. Gateway received three contracts to supply desktop and laptop computers and monitors.
Other vendors receiving contracts were Hewlett-Packard Co., Insight Enterprises Inc., IBM Corp. and Western Blue Corp.
HP, Western Blue and Insight Enterprises formed a team in the bidding and will share with Gateway the desktop contracts, which are estimated to be worth $53 million over two years, the California Department of General Services said.
Gateway and IBM received the laptop contracts, worth a combined $22 million over two years, the state said. Gateway’s monitor contract is worth $9 million, the state said.
Gateway declined to specify the value of its contracts because it would depend on purchasing decisions by individual government departments, but said the total was likely to be “substantial.” Gateway said the contracts’ terms were two years, with three optional, one-year extensions.
Gateway opened a Sacramento sales office to better serve government customers, it said.
Piper Jaffray analyst Les Santiago on Tuesday recommended investors buy Gateway shares, saying the company had won some strong contracts from education and government customers during the third quarter. Also, the company is benefiting from strong computer demand, in particular for laptops.
Gateway’s professional unit, which sells to businesses, government and educational institutions, had lost market share in the fourth quarter of 2004 “primarily due to a stale product line and a sales force in transition,” Santiago wrote in a note.
But the company has upgraded some of its product lines and won some recent large contracts, including the California deal as well as a pact to supply equipment to the University of Arizona.
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Dow Jones/Associated Press and Reuters were used in compiling this report.
