Moo Bad News from Gateway

Not withstanding all those clever moo-cow ads, competition-hindered computer
maker Gateway Inc. says it expects to post a first
pre-tax loss, excluding special charges, of between $100 million and $120

The special charges are expected to be $75 million to $100 million,
associated with the
restructuring actions
(2,250 jobs cut from its current headcount of
14,000) announced in January.

And although Gateway attempted to put on its game face at a meeting with
financial analysts, the company said that for all of 2002, it expects
in the range of $4.5 billion to $5 billion and will record a pre-tax loss,
excluding special charges, of $200 million to $250 million.

The Poway, Calif.-based company said it expects return to profitability,
excluding special charges, in fiscal year 2003. But for the first quarter of
this year, it projects revenue of about $970 million, down 52 percent from
$2.03 billion a year earlier.

Price wars and intense competition in the PC market have left Gateway’s
shipment of units in fourth place behind Dell, Compaq and Hewlett Packard,
according to a recent Gartner Dataquest survey.

“We’ve regained value leadership in our core products since we went to our
new pricing strategy and are bucking seasonal sales trends,” Gateway
and CEO Ted Waitt said in a statement. “… This year, our objective is
growth — we’ll continue to drive growth rates that are better than the
industry average and as a result, Gateway will return to long-term,
sustainable profitability and gain share in our target markets.”

Gateway said that in addition to driving growth in its core PC business, the
company is advancing its digital solutions capabilities and will alter the
mix in its order-for-delivery focused stores by stocking them with more PCs
for immediate sale, along with software, digital cameras and wireless

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