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Gateway misses estimate
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July 23, 1998: 6:56 p.m. ET
Despite 33 percent increase in PC sales, company falls 5 cents short
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NEW YORK (CNNfn) - Computer maker Gateway Inc. missed Wall Street estimates for the second quarter despite a 16 percent increase in sales and an 8 percent hike in net income.
The North Sioux City, S.D., company earned $60.7 million, or 38 cents a diluted share, compared to $56.4 million, or 36 cents a diluted share, a year ago.
Revenue increased to $1.62 billion from $1.39 billion a year ago.
Despite the increases in sales and profits, Gateway missed Wall Street's forecast of 43 cents.
Gateway (GTW) shares closed off 3 to 58-3/4 and slumped to 56 in after-hours trading.
Ted Waitt, Gateway's chairman and chief executive, attributed the dip to slow sales in April and May, which are traditionally weak periods for PC companies.
He said the company's Your:)Ware leasing program has been a success since its launch at the end of May and should help sales going forward.
"This program is knocking down the barriers to entry for people who want to participate in the digital revolution. After a seasonally slow April and May, our marketing program kicked in, driving a dramatic increase in volume in June and creating good momentum for the second half of the year," Waitt said.
Gateway said Your:)Ware led to a 48 percent increase in computer shipments in June compared to 1997 figures. More than 60 percent of the units sold to consumers were through the new program.
International sales comprised 15 percent of shipments in the period. Even in the tough Asia-Pacific region, Gateway sales grew more than 33 percent and revenues about 33 percent. However, European revenues were off 22 percent.
Gross margins came in at a record 20.6 percent compared to 19.5 percent in the first quarter. Gateway attributed the growth to Your:)Ware, an improved product mix and lower component costs.
Looking to the rest of the year, Waitt said the company will focus on increasing its market share in the consumer sector. To help reach that goal, Gateway recently opened a new sales center in Salt Lake City that will house 300 new employees by year's end.
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Gateway
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