Consumers Help Gateway to Record Q1 Profit

SAN FRANCISCO (04/13/2000) - Gateway 2000 Inc. reported first-quarter net income today of $136 million, up 37 percent from a year ago and a record for the company, according to a statement. Strong sales to consumers, as well as an uptick in sales of non-PC products and services, contributed to the strong showing, Gateway said.

Diluted earnings per share for the quarter were 41 cents, up from 31 cents a share last year and in line with the expectations of financial analysts polled by First Call/Thomson Financial. Revenue for the quarter, which ended March 31, totalled $2.34 billion, up 11 percent from a year ago, Gateway said.

Like some of its rivals, Gateway has been working hard to boost sales of products and services sold alongside PCs, such as peripherals and Internet access. Income from those non-PC sectors exceeded 25 percent of Gateway's overall income in the first quarter, the company said today.

Gateway's ISP service, operated through a partnership with America Online Inc., attracted 300,000 new subscribers in the quarter, according to Gateway.

The company shipped 1.3 million PCs in the first quarter, compared with 1.1 million units a year ago, a 16 percent increase. While consumer sales jumped 27 percent year over year, sales to businesses fell 19 percent and were slower than expected for most of the three-month period, Gateway said.

"While we're clearly disappointed with our business performance for the first quarter, we're continuing to intensify our focus on our target markets of small and medium businesses, government and education," Jeff Weitzen, Gateway president and chief executive officer, said in a statement.

On a geographic basis, revenue surged 31 percent in Gateway's EMEA (Europe, Middle East and Africa) units, where performance in the Netherlands and the U.K. were particularly strong. Gateway's Asia-Pacific revenue increased 27 percent year over year, fueled by continued strong sales in Japan and a sharp uptick in southern Asia, including Hong Kong, Malaysia and Singapore, the company said.

Gateway's shares on the New York Stock Exchange closed today at $51, down $4.25 or 7.7 percent from yesterday. The results were announced after the market closed.

Gateway, based in North Sioux City, South Dakota, can be reached at +1-605-232-2000 or on the Web at http://www.gateway.com/.

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