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Improving holiday sales helped



trim its operating loss, while a gain on a stock redemption helped the computer manufacturer turn the prior year's net loss into profit.

Excluding gains and charges, the company on Thursday reported that its bottom line for the quarter narrowly topped analysts' estimates. But the company countered that news with somewhat disappointing guidance for its current quarter.

In after-hours trading, investors seemed to focus on the negative outlook, sending Gateway's stock down 35 cents a share, or 7%, to $4.65.

Gateway earned $93.91 million in the fourth quarter. But in calculating the company's per share bottom line, company executives excluded the stock redemption gain, leaving the company with a loss of 2 cents per diluted share.

Still, that result was better than the year-prior period, when the company lost $114.06 million, or 35 cents a share.

The company's sales jumped 17.5% year-over-year to $1.03 billion in the quarter.

Excluding taxes, the redemption gain and other income, the company posted an operating loss of $15.11 million, compared with an operating loss of $92.55 million in the 2003 holiday quarter. On a pro forma basis, which excludes not only the company's stock gain, but also restructuring and other charges, the computer maker would have earned $15 million, or 4 cents a share.

On this pro forma basis, analysts had expected the company to earn 3 cents a share on $1.03 billion in sales, according to Thomson First Call. Last month, the company

upped its pro forma guidance for earnings for the quarter to 3 cents to 4 cents a share and its revenue outlook to $1 billion to $1.025 billion.

In the first quarter, Gateway expects to post a bottom line ranging from break-even to a loss of 4 cents a share on a GAAP basis, or break-even to a loss of 3 cents a share excluding restructuring charges. The company predicted that revenue for the quarter would range from $810 million to $850 million.

Wall Street had predicted that the company would earn a penny a share, excluding gains and charges, in the current quarter on $896.71 million in sales.

In the first quarter last year, Gateway lost $171.53 million, or 51 cents a share, on a GAAP basis on $868.38 million in sales.

Shares of Gateway closed the regular session up 5 cents to $5.