Gateway shares fall after low projections

Shares of Gateway Inc. fell more than 6 percent on Wednesday, a day after the personal computer maker warned of a larger quarterly loss than expected and analysts widened their 2003 loss estimates several fold.

While the entire PC industry has suffered from slower demand in the past two years, analysts noted that the company -- which has 270 Gateway Country Stores and sells only directly to customers -- faced many problems of its own making.

"We remain convinced that no combination of everyday pricing and occasional promotions will return Gateway to profitability given its current cost structure -- the company needs to close stores," Salomon Smith Barney analyst Richard Gardner wrote in a research note.

Gateway was also losing market share to rivals such as market leader Dell Computer Corp. and No. 2 computer maker Hewlett-Packard Co. that have aggressively adopted its strategy of selling directly to customers, analysts said.

Gateway said after the market closed on Tuesday that it expects to post a fourth-quarter loss of 18 cents to 19 cents instead of 13 cents a share. It lowered its revenue estimate to of $1.06 billion, almost 12 percent below its prior "best-case" forecast of $1.2 billion.

"This is not a big surprise given their (Gateway's) comments in early December, restructuring actions and poor positioning against Dell and rapidly improving HP," wrote Dan Niles, an analyst at Lehman Brothers.

News source: The Washington Post

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