Gateway's Good-News, Bad-News Quarter

Sales fall, losses widen, but its EPS loss is lower than expected and pre-tax loss is narrower.
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Gateway

(GTW)

saw second-quarter sales tumble while its loss widened from last year's levels, although it did see some improvement in gross margin.

The company's loss widened to $69.8 million from last year's $58.5 million, but Gateway pointed out that last year's results were aided by a $34 million income tax benefit.

Its pre-tax loss of $70 million was actually 25% better than last year's pre-tax loss of $93 million, the company said.

Gateway's EPS loss of 22 cents showed less red ink than Wall Street's expectations, which had assumed an EPS loss of 28 cents.

Sales of $799.6 million were down 20% from the same quarter in 2002 and just below the consensus estimate of $803.9 million.

Gross margin of 17.2% saw a gain from last year's 14.3%. Gateway chalked up the better profit level to savings in the cost of goods line and increased sales of non-PC products and services.

It confirmed analysts' consensus estimates for the third quarter of $874 million and fourth-quarter revenue of $954 million. It says it's maintaining prior guidance for a third-quarter loss of 19 cents a share and a fourth-quarter loss of 9 cents a share. Wall Street analysts were gearing for losses of 20 cents and 10 cents, respectively.

In regular trading, shares closed down 11 cents, or 2.9%, to $3.68.