Gateway's Earnings Rise 37%, While Meeting Expectations

Made-to-order computer company Gateway(GTW Quote) reported Thursday that its earnings rose 37% in the first quarter. The figures meet Wall Street's expectations, but the results disappointed analysts, who were looking for a penny more, the so-called whisper number.

The San Diego-based company said it earned $136 million, or 41 cents a diluted share, compared with $99.6 million, or 31 cents a share, in the first quarter of 1999.

Analysts surveyed by First Call/Thomson Financial had a consensus estimate of 41 cents a share in the latest quarter.

Revenues rose 11% to $2.34 million from $2.1 million on strong sales of Internet subscriptions and products through Gateway Country retail stores.

Gateway, together with partner America Online(AOL Quote)added 300,000 new subscribers in the quarter for a total more than 1.3 million.

The company that once pursued a pure mail-order business model added 38 new retail outlets in the period for a total of 318 stores.

Shares of Gateway fell 4 1/8, or 7%, to close at 51 1/8 ahead of the earnings announcement. It was little changed in after-hours trading.

Many investors had hoped that strong earnings reports from the chip makers and the hardware sector could help reverse the technology-led Nasdaq drop. On Wednesday, Advanced Micro Devices(AMD Quote) reported earnings that far exceeded Wall Street expectations. That earnings result helped set the tone for Thursday's reports from Gateway and Sun Microsystems(SUNW Quote).

After the stock market closed, Sun reported that its earnings rose 44% in its third fiscal quarter, beating Wall Street's expectations by 3 cents a share, as its revenues topped $4 billion for the first time.