PC Makers Follow Gateway's Sharp Slide

Gateway's(GTW Quote) earnings warning triggered a wave of tumbling stock prices in the PC market and analysts came out of the woodwork to cut their targets on the stock.

A day after the computer maker warned that fourth-quarter earnings and revenue would badly miss expectations, Lehman Brothers slashed Gateway's 12-month price target to $35 from $85. The firm also decreased its 2000 earnings view to $1.60 from $1.85 a share and its 2001 EPS view to $1.87 from $2.25.

Bear Stearns, Salomon Smith Barney and J.P. Morgan also cut their ratings and estimates. Bear Stearns cut its 2001 estimate to $1.90 from $2.25 a share. Salomon took its rating down to neutral from buy, while J.P. Morgan downgraded Gateway to market perform from buy.

Shares of the company were recently down 40%, or $11.80, to $17.70 in New York Stock Exchange composite trading, hitting a new 52-week low. Gateway closed at $31 two days ago.

Other PC makers were also dragged down. Dell(DELL Quote) had its rating cut to neutral from outperform by Salomon, which also set a new price target of $26 for the company's shares. Salomon said Gateway's warning bodes negatively for Dell for the fiscal 2001 fourth quarter and in fiscal 2002. Shares of Dell were recently tumbling 8.6%, or $1.88, to $19.88, below its 52-week low on the Nasdaq.

Shares of IBM(IBM Quote) fell 6.3%, or $6.31, to $93.50 on the Big Board, while Apple(AAPL Quote) was recently lower by 7%, or $1.25, to $16.44.

Hewlett-Packard(HWP Quote) plummeted 9.6%, or $3.31, to $31.25 in New York Stock Exchange trading, while Compaq(CPQ Quote) was down 14.9%, or $3.39, to $19.31.