Updated from 11:20 a.m. EST.
Better-than-expected earnings and more cost cuts apparently weren't enough for
shareholders, who sold the stock aggressively Friday morning.
Gateway made good on a promise to return to profitability in its fourth quarter, and actually did better on the bottom line than Wall Street was expecting. The computer marker earned $5.1 million, or 2 cents a share, excluding a gain related to the early extinguishment of debt.
Including the gain, the company earned $9.4 million or 3 cents a share. According to First Call, analysts were expecting the company to earn a penny a share in the latest quarter.
The stock closed Friday in regular trading down $1.14 to $5.22, a loss of 18%.
Sales totaled $1.14 billion, a little shy of the guidance the company offered Jan. 7. In a press release after the close of regular trading Thursday, Gateway said "continued efforts to simplify its operations and reduce its cost structure, coupled with a shift to higher margin sales, contributed to its profit during the quarter." The company had sales of $2.45 billion in the same quarter a year earlier.
said earlier this month that it expected to return to profitability in the fourth quarter on a pretax basis, excluding special charges. But at the same time, the PC maker known for its dairy-cow themes projected revenue of $1.16 billion, below the $1.39 billion analysts were anticipating.
In the first quarter, the company expects to take a charge of $75 million to $100 million to cover the cost of closing some locations and other restructuring actions. Gateway is cutting 2,250 of 14,000 jobs, four of its 10 administrative and support sites and 19 of its 296 Country Store showrooms. The PC maker also cut its workforce in 2001. The company said the restructuring will result in savings of about $100 million a year.
The company's fourth-quarter domestic unit sales decreased 17% from the third quarter to 681,000. Total unit sales, including discontinued international operations in the third quarter, declined 24% sequentially. While unit sales fell, the company's average unit price increased to $1,667 during the fourth quarter, up from $1,574 for the third quarter.
Gateway was troubled throughout 2001 by a management shakeup and several efforts to reorganize the company, including the most recent reorganization announced Aug. 28.
The stock has fared far worse than the overall industry during the last year. This year alone, Gateway has lost 21.4%, compared with a 6% decline for the Philadelphia Stock Exchange Computer Box Maker Index. The stock has lost almost 62% since the beginning of 2001, while the computer index is down only 8% over the same period.