Gateway Reports Narrow 3Q Net Loss As Restructuring Continues

The personal-computer company reported a net loss of $56.5 million, or 16 cents a share, during the three months ended Sept. 30, compared to a loss of $136.1 million, or 43 cents a share, the same period last year. The latest period included charges of $63 million for restructuring; the same period of 2003 included charges of $73 million for restructuring.

Excluding the charges, Gateway posted a profit of $4 million, or 1 cent per share.

The results easily beat the expectations of analysts polled by Thomson First Call, who were anticipating a loss of 7 cents per share.

Revenue rose 3.7 percent, to $915 million from $883 million last year, bolstered by the company's acquisition of eMachines Inc. in March. Gateway shipped 931,000 PCs during the quarter, up 67 percent from the same period last year, due mainly to the eMachines acquisition.

"I believe Gateway is on track, but we're at the beginning of a long journey here," chief executive Wayne Inouye said in a telephone interview.

Gateway said it expects fourth quarter revenue of between $975 million and $1 billion and earnings per share before restructuring costs of about 1 cent per share. The company said it expects restructuring, transformation and integration of about 1 cent per share, resulting in net earnings of breakeven to 1 cent per share.

Gateway, which recently relocated from the San Diego suburbs to Irvine, has posted losses in 14 of the 15 previous quarters as it became an also-ran against larger competitors such as Dell and Hewlett-Packard. After a major effort to sell consumer electronics failed to produce a turnaround, Gateway bought eMachines and redoubled its efforts to sell more PCs.

Earlier this year, Gateway closed all of its 188 U.S. stores and said it would slash its work force to less than 2,000 employees by the end of this year, down from 7,400 at the end of last year and a peak of about 25,000 in 2000.

For the first nine months of the year, Gateway reported a net loss of $569.4 million, or $1.58 per share, compared to a loss of $411.9 million, or $1.27 per share in the same period last year.

Revenue for the first nine months rose slightly to $2.621 billion from $2.527 billion in the same period last year.

The results were released after markets closed. Gateway's shares rose 2.8 percent, or 15 cents, Thursday to close at $5.39 on the New York Stock Exchange. Shares rose more than 11 percent, or 61 cents, in after hours trading.

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