Gateway squeezes out small profit

Computer maker Gateway Inc. said that it swung to a profit in the second quarter from a loss a year earlier, but that revenue fell more than expected.

Net income for the quarter totaled $1.9 million, or a penny a share, contrasted with a loss of $7.7 million, or 2 cents, a year earlier.

Revenue fell to $841 million from $919 million a year earlier.

Retail revenue grew to $614 million from $592 million, up 4% year over year. But that growth was offset by revenue declines in the company’s professional and direct segments.

Analysts surveyed by Thomson Financial had expected Gateway to break even on higher revenue of $953 million.

Chief Executive Ed Coleman said Gateway would continue to work on reducing its cost structure while improving execution and its focus on consumer business.

Gateway was expanding into Eastern Europe and began a pilot sales program in China in June, he said.

The Irvine-based company sold nearly 1.09 million PC units in the second quarter, down 7% from a year earlier and 13% from the first quarter.

As part of Gateway’s 2005 marketing, development and settlement agreement with Microsoft Corp., second-quarter results included a continuing quarterly benefit of $8.6 million.

Gateway shares fell 12 cents to $1.33.