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Gateway 2000 in the red
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October 23, 1997: 8:49 p.m. ET
PC seller records $113M in charges, eliminating third-quarter profits
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NEW YORK (CNNfn) - One-time charges and higher inventories levels pushed Gateway 2000 Inc. into the red in the third quarter, the PC direct marketer said on Thursday.
The North Sioux City, S.D.-based company said it recorded pretax charges totaling $113.8 million: $60 million for costs associated with the acquisition of Advanced Logic Research; $45.2 million to write off equipment; and $8.6 million for severance pay.
The charges contributed to net losses of $107.1 million, or 68 cents a share, compared with net income of $60.7 million, or 39 cents a share, a year earlier.
One analyst who follows the company said without the one-time items, operating profits would have amounted to about 7 cents a share -- below the estimates of 11 cents a share that Wall Street had expected.
To be sure, Gateway had warned earlier in September that the third quarter performance would not be up to par. In early September, the company said earnings would fall short of expectations because of the effects of the strike at United Parcel Service.
"In terms of the bottom line, their guidance was very loose," said Curt King, analyst at Montgomery Securities. "UPS didn't help but you can't blame this kind of shortfall on UPS."
Revenues rose 25 percent to $1.5 billion.
Apart from the charges, Gateway 2000 said the quarter was also affected by excess inventories. Company officials told analysts the write-off totaled approximately $30 million to $40 million, but refused to be specific.
Despite the inventory build-up, Gateway said shipments rose 31 percent to 622,000 PCs in the quarter. 
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Gateway 2000
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