Gateway expects wider loss for Q3

PC vendor Gateway on Thursday lowered its earnings expectations for its third quarter but said it still expects to return to pre-tax profitability in the fourth quarter.

South Dakota-based Gateway blamed the projected loss mainly on a drop in demand in all customer segments following the terrorist attacks on the U.S. on Sept. 11. The company now expects to report a net loss of between US$0.14 and $0.17 per share, excluding special charges, for the quarter ended Sept. 30, Gateway said in a statement. Analysts polled by Thomson Financial/First Call had expected the company to post a loss of only $0.04 per share.

In late August, Gateway projected a "slight loss" on a pre-tax basis, excluding special charges. Although domestic unit sales increased sequentially, they did not increase as much as the company had expected. Additionally, the company's international operations posted a greater than anticipated loss in the final quarter of their operation, Gateway said. The company announced in August that it would close its international operations by the end of last month.

In addition, the current downturn in the IT sector took a toll on the company's investments, causing it to take an additional non-cash charge of between $100 million and $130 million in the third quarter, Gateway said.

Although Gateway remains optimistic about returning to pre-tax profitability in the fourth quarter, it does not expect the profit to be enough to keep it in the black for the third and fourth quarters together, the company said.

The third quarter was a busy one for Gateway. Not only did the company close its European and Asian operations, it also announced it would layoff 25 percent of its employees and simplified its product line by shifting to only offering Intel Corp. processors. The company will announce its final results for the third quarter on Oct. 18.

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