Gateway Posts Weaker 4Q Results, Gets SEC Notice (Gateway Deathwatch Rolls On!)

Dow Jones ^ | January 29, 2003

[Timesink]

Dow Jones Business News

Gateway Posts Weaker 4Q Results, Gets SEC Notice

Wednesday January 29, 5:41 pm ET

POWAY, Calif. -- Gateway Inc. (NYSE:GTW - News) swung to a net loss in the fourth quarter on lower revenue.

The personal-computer maker late Wednesday reported a net loss of $72 million, or 22 cents a share, compared with year-earlier net income of $9.4 million, or three cents a share.

Revenue fell 7% to $1.06 billion from $1.14 billion.

The company warned earlier this month it expected a loss of 18 cents to 19 cents a share on revenue of $1.06 billion.

Gateway noted three cents of the latest quarter's net loss was due to a contract dispute with AOL Time Warner Inc.'s (AOL) America Online unit regarding Gateway-generated subscribers for the Internet-service provider. Gateway said America Online had recomputed its payments to Gateway and if the adjustments made in the second half of 2002 are appropriate, they would cost Gateway about $ 3 million to $5 million in quarterly revenue.

For all of 2002, Gateway had a net loss of $309 million, or 95 cents a share, versus a 2001 net loss of $1.03 billion, or $3.20 a share. Revenue slumped 31% to $4.17 billion from $6.08 billion.

Excluding charges, the company's since-dissolved international operations and accounting changes, Gateway said it would have lost 76 cents a share in 2002, compared with a 2001 loss of 21 cents a share.

"We made steady improvements across our business through most of 2002, but the fourth quarter proved to be a challenge for us," Chairman and Chief Executive Ted Waitt said in a prepared statement. "Even so, we did make progress in a couple of key areas in the quarter, and we're not about to let up in driving further improvements this year."

Gateway noted that same-store sales increased 4%, its first gain in two years, "in one of the most challenging retail environments in recent times." Same-store sales are sales in stores open at least a year.

The company added its early November launch of plasma televisions was very successful, giving Gateway a double-digit market share in the U.S. consumer market in 10 weeks. "Importantly, 70% of customers who purchased the product at retail are new Gateway customers," the firm noted.

Gateway also said notebook sales surged 40% from a year earlier. Overall PC sales rose 6% to 720,000 units, and their average price fell to $1,467 from $1, 533 in the third quarter.

For all of 2002, U.S. sales of PCs fell 15% to 2.7 million.

Gateway disclosed the SEC investigation, which began in December 2000, two months ago. The company said at the time it expected to probe to be complete in the fourth or first quarters and noted it restated its results for the first three quarters of 2000 in February 2001.

At the time of the restatement, which was one month after Mr. Waitt resumed control of the company, Gateway said the revision was done to reflect the retroactive adoption of new accounting principles, as well as a revision in the accounting treatment for certain items.

-Kevin Kingsbury; Dow Jones Newswires; 609-520-4367

[Timesink]

Currently at $2.89, down 3¢ (1.03%) from 4pm close.

[finnman69]

My first computer was a Gateway. Total lemon, never worked right...since then..only DELL..on my 6th.

[strela]

My laptop is a Gateway. Its worked like a champ for over a year now. (But I'll probably upgrade it before the company goes belly-up).

[Phantom Lord]

Is it just me or are Gateway computers way over priced? And Im not talking a little bit over priced, but BIG TIME over priced.

I got a new computer last Christmas. It was built for me by my brother in law. I know jack squat about computers and to assure me I was getting a deal he gave me a list of all the components and power and all that computer stuff and told me to go shop it vs Dell and Gateway. I went to the local Gateway store and said I want a computer with "this". The kid punched it into the computer and handed a printout of the stuff the computer had and its final price. It was more than DOUBLE what my brother in law was charging me. and Dell was only about 35% higher.

[mgstarr]

Gateway disclosed the SEC investigation, which began in December 2000, two months ago.

I thought disclosure rules mandated the timely reporting of such items. Two years seems a little late in coming. Not the speediest of investigations either apparently.

[Martin Tell]

Good riddance to Gateway. I have one of their laptops; it has lasted almost 5 years, but the motherboard has been replaced 4 times, and it has had numerous other problems. I am waiting for it to die for good, so I can get another company's product. Gateway's customer service S**ks, but I found 2 good customer reps over the years. The rest I found to be rude, ignorant of their company's products, and totally bound by "the rules." Next time Dell. I had company supplied Dell laptops several times. You can almost pound nails with the things and they still work great. Not too pretty, however.

[TroutStalker]

I'm glad someone is happy with Dell. I bought my first last month and it is a total lemon. None of the features I bought it for worked. The video capture doesn't work and it doesn't recognize the DVD drive. Have replaced the HD, motherboard and capture card. Spent more hours on the phone than I can count. Should have thrown my money down a rathole like Gateway, at least they don't constantly tout how great their quality is.

[Texas_Jarhead]

Don't feel too bad, Dell's service has been slipping for a while now too.

[Oldeconomybuyer]

The deathwatch started the day they opened their first retail store. Sad to see a good company fail.

[SoDak]

Truth is, service sucks everywhere, and everyone sells lemons. For every 10 people I find that loves Dell, I can find 10 who will warn me that they are the worst computers money can buy. It has to be tempered by just how good the person is that's running the computer. I have a Gateway laptop that has never given me anything but great performance, but someone else down the street hates their Gateway.

[HAL9000]

I'm glad someone is happy with Dell. I bought my first last month and it is a total lemon.

I've seen two Dell lemons this month. The owners of one of them is paying $$$ to get it fixed, even though it is less than a year old and still in warranty. The owner of the other one returned it and got her money back.

[Cicero]

I had about five Gateways, in the days when they were well set up and cheaper than Dell. I loved the cow screensavers. But Ted Waite took a few too many vacations, they lost their concentration, and Dell started selling cheaper as well as better. So my last five computers have been Dells.

[toupsie]

You mean Apple is going to outlive one of the major PC manufacturers? How can this be? Gateways sells computers cheaper than Apple. Guess it must be the OS.

[HAL9000]

PC World - December 2002 -

Our most recent survey of 29,593 subscribers reveals growing frustration with computer service. Last year, PC World readers told us they were unhappy with technical support. This year's survey shows little--if any--improvement. Dell, for example, tumbled in service overall--especially in hold times. The other big news: Apple rated higher than any other computer maker.

Link to full article

[TroutStalker]

It has to be tempered by just how good the person is that's running the computer.

Well, the tech that Dell send out three times so far is baffled by the problems this machine has.

[Dinsdale]

Both Gateway and Dell are just vendors/integrators for Tiawanese laptop manufacturers (they do make their own desktops). This partly accounts for the quality swings in laptop hardware.

In an old article on Tomshardware (I think, perhaps anandtech) you can identify the same machine being sold by first tier vendors like HP, IBM, second tier vendors like Gateway and Dell and truly generic shops. Usually they have different hard drives etc but are still very similar.

Before you buy a laptop do your homework.

[SoDak]

I believe it. Having worked as a salesman for Gateway for 3 years prior to going to the technical side of things, I can confirm that field techs are not great for Gateway, and probably not that great for Dell. I'm not totally sure how Dell arranges onsite repairs, but at Gateway, they called a local "pc guy" in wherever, and just sent him out. He or she was not an actual employee of the company.

[SoDak]

Yes, and their desktop machines usually draw from the same pool of parts too. Sometimes, a particular vendor will get a price break on a card that's not quite the same as the other, but it's all basically the same. And, as anectdotal evidence, I'll put this forth, I have absolutely no love for HP computers. In 5 years of administering PC's, they are simply the worst boxes I've dealt with. All the rest are in the same quality range. I opened a site once, in 2001, and had 27 out-of-box failures in a group of 108 HP PC's that a branch manager ordered for his site.

[Salo]

I am not even sure gateway has "pc guys" anymore. When we have one that goes down, they have us send it to Gateway Country. Gateway Country then calls us and asks us how to fix it. I just wish they'd send us the parts like they used to. We only used to buy gateway, but now we get as many dell's. The dells are more solid, but their service sucks, too. We only use Dell for servers because the thought of a gateway server....ugh. We have one hp server that has had several hardware failues, so that's a no go from now on. We might end up using ibm for our servers.

Still, I'm shocked to see how far they have fallen.