Gateway earnings fall way short, announces layoffs
Published: 12 Jan 2001 08:54 GMT
Amid a rapidly deteriorating PC market, Gateway on Thursday reported fourth quarter earnings below even lowered expectations, again slashed its 2001 forecast and said it will cut more than 10 percent of its work force.
Gateway lost $94.3m (around £67m) or 29 cents per share, including a previously announced $187m charge, on sales of $2.37bn. Excluding the charge, Gateway would have earned $37.6m, or 12 cents per share.
Analysts had been expecting Gateway to earn 37 cents per share, excluding charges, on revenue of $2.64bn.
Gateway had not been expected to report earnings until next week.
"While Gateway's 2000 results were not as we had hoped, our core strategy of being a trusted guide for technology and of providing products and services in addition to the PC -- our beyond-the-box initiative -- is the right strategy," Jeff Weitzen, Gateway's chief executive officer, said in a statement.
"For now, we need to prioritise our business initiatives against the present economic realities. Tough times call for tough decisions."
The job reductions will be a combination of layoffs and the elimination of open positions throughout Gateway's 24,000-person worldwide work force, spokesman John Spelich said. The announcement came after market close. Gateway's shares had closed up $2.96, or 15 percent, at $22.90.
On 29 November, Gateway warned that its earnings would be around 37 cents per share -- 25 cents lower than prior forecasts--because of weakening PC sales. On Thursday, Gateway predicted continued hard times over the next six months amid a weak economy and a glut of unsold computers.
"When we preannounced on 29 November, we had expected some continued ramping of demand in December based on past experience, but that did not materialise," Weitzen said. "Softer sales have caused inventories of our competitors to swell and have touched off an aggressive pricing environment that will have negative consequences for the PC sector for the next six months."
Gateway said it is taking a $50m pre-tax charge in the first quarter to account for the work force reductions.
In its November warning, Gateway said it expected 2001 per-share earnings to be around $1.89, down from a prior estimate of $2.28. On Thursday, the company again lowered its expectations for this year. It now expects its per-share earnings, before charges, to be $1.44 -- or 6 percent above last year's $1.36.
Gateway also said its revenue for 2001 will grow 3 percent over last year.
In making the new forecast, Gateway said it sees a "continuation of the present economic environment through the first half" but expects improvement in the second half of the year.
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