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Gateway misses 2Q target
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July 19, 2001: 5:33 p.m. ET
PC maker misses loss target by a penny, expects to break even in second half of 2001
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NEW YORK (CNNfn) - Personal computer maker Gateway Inc. on Thursday reported a wider-than-expected loss for its second quarter on revenue of $1.5 billion and said it is considering "significant restructuring of its worldwide operations." The company also warned its results for the second half of the year will fall far short of expectations.
Gateway reported a second-quarter loss before taxes of $9 million, or 2 cents per share, down from earnings of $118.2 million, or 36 cents per share, in the year-ago quarter.
Analysts surveyed by First Call expected Gateway (GTW: Research, Estimates) to post a before-tax loss of a penny per share with revenue of about $1.89 billion.
"We plan to take aggressive steps to reorganize our company and be an industry leader as we've done at so many other points in our history," said Ted Waitt, Gateway founder and chief executive, in a statement.
Chief Financial Officer Joseph Burke said in a conference call that U.S. sales restructuring would include layoffs, but declined to estimate how many jobs would be cut.
Gateway now to break even in second half of year
Gateway said it now expects to break even in the second half of 2001, while analysts are currently predicting earnings of 32 cents per share for the six months, according to First Call.
The company expects sequential growth in unit sales for the next two quarters, but said it may not meet last year's levels.
For the second quarter, unit sales were 923,000, down 21 percent from the same period a year ago and down 6 percent from the first quarter of 2001.
"In large part it's still the continued softness in the market we are serving," Burke said. "The overall U.S. consumer PC market has declined each of the last three quarters -- that's the first time that's ever happened."
After posting a first-quarter loss of a penny per share in April, the company said it planned on breaking even for the first half of the year, excluding charges, but predicted a return to operating profitability in the second half of the year.
Gateway also announced it is combining its consumer and business division and the companies U.S. operations will be organized into three geographic regions.
The company said it will turn its 300 retail locations into "technology resources centers," which will serve as hubs for sales, service, and marketing.
At the end of May Gateway vowed to beat prices of rivals Dell and Compaq, but said the pricing battle would not prevent it form breaking even in the first half of the year. 
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