Updated from 4:40 p.m. ET
keeps piling on the bad news.
The PC maker said after the bell that it now expects to break even on an operating income basis, before including nonrecurring charges, in the first quarter. The company, in the latest in a series of recent warnings, also said it expects unit sales in the quarter to be down slightly from a year ago.
First Call/Thomson Financial
, analysts expect the company to earn 17 cents in the first quarter.
"As for the rest of 2001, we expect to continue operating the business on a break-even basis through the first half of the year, with a planned return to profitability and unit growth on a year-over-year basis during the second half," Ted Waitt, Gateway's chairman and chief executive, said in a statement.
Gateway also said it will restate its previously reported financial results for the first three quarters of 2000 and revise the full-year results to reflect the retroactive adoption of new accounting principles and a revision in the accounting treatment for certain items. The changes include the adoption of an accounting method requiring that freight charges billed to customers be included in net sales and the related expense be included in cost of goods sold.
In addition, Gateway implemented an accounting method that provides specific guidelines on revenue recognition timing. The company retroactively changed its policy on revenue recognition for the year, in order to recognize revenue when the product is delivered rather than when the product was shipped.
As a result of the changes, Gateway reported a fiscal 2000 profit of $241.5 million, or 73 cents a share, on revenue of $9.6 billion, a decrease of 45% from 1999. Operating income in 2000 totaled $511.3 million, or 96 cents a share, a decline of 19% from the prior year.
Separately, the company said that on Feb. 16, it sold about $500 million in finance receivables to a third party at book value. Following the sale, the company held about $300 million in finance receivables before reserves for loans to its customers. Gateway will use the cash from the sale for general corporate purposes.
As of Feb. 16, Gateway had a balance of about $1 billion in cash and marketable securities.
Gateway expects a first-quarter charge of $150 million to $275 million, including the previously announced estimate of $50 million for job cuts and related costs. The company said the increased charge is the result of the new management's decision "to refocus on the company's core business model" that is, personal computers.