Gateway Swings to a Loss

Gateway(GTW) maintained its track record of underachievement, as the No. 3 PC maker in the U.S. reported weaker-than-expected results Thursday.

Irvine, Calif.-based Gateway said it lost $7.7 million, or 2 cents a share, on $919 million in sales in the three months ended June 30, compared with a profit of $17.2 million, or 5 cents a share, on sales of $873 million the same time a year ago.

Wall Street analysts were looking for the computer maker to earn a profit of 2 cents a share, with $1 billion in revenue, according to Thomson Financial.

Shares of Gateway rose 0.6%, or one penny, to $1.60 in extended trading.

The company's stock is trading near its 52-week low. Two weeks ago, Gateway was dropped from the S&P 500.

"While we are disappointed with our performance in the second quarter, we believe that our efforts in the first half of the year are beginning to resonate with customers and move us in a positive direction," said interim CEO Rick Snyder in a statement.

In February, CEO Wayne Inouye unexpectedly resigned after a disappointing quarter.

In the most recently completed quarter, Gateway said it sold more than 1.17 million personal computers, up 16% year over year but down 15% from the first quarter.

Last month, the industry research firm Gartner reported that Gateway had increased its U.S. market share to 6.2% in the second quarter, from 5.7% at this time a year ago.

But Gateway is still struggling to find the right mix of products and target markets that will yield a profit. Gross margins in the second quarter were 5.5%, down from 10% in the second quarter of 2005.

Gateway blamed the drop on an increase in less-profitable retail PCs as a portion of its overall sales as well as decreasing margins in its professional division, which sells PCs to corporations and educational institutions.