Gateway Reports 4th Qtr. Sales, Net Profit Losses

POWAY, Calif.— Overshadowing such fourth quarter accomplishments as 4 percent comp retail store growth — the first year-over-year same-store sales increase in two years — computer maker Gateway posted both sales and net losses for the three months.

The company's fourth quarter loss climbed to $72 million, compared with year-ago net income of $9.4 million. Revenue dropped to $1.06 billion, from $1.14 billion in the same quarter in 2001. The quarterly results included a $2.8 million loss from an ongoing dispute with America Online.

Gateway indicated it may extend its consumer electronics line, which is topped by its private-label 42-inch plasma TV at a low $2,999 price, digital cameras, camcorders and audio players. Gateway confirmed that CEO Ted Waitt said, during an analyst conference call on its financial announcement: "Our digital products will continue to disrupt the market and create excitement for our customers." Plans for new products were not announced.

In its financial presentation, Gateway, which provided an update on a previously disclosed Securities and Exchange Commission (SEC) investigation — which it believes relates to accounting from fiscal 2000 — said it has been given SEC notice concerning the allotted time allowed to provide a defense against potential commission action.

Hard hit by tough competition in the computer business, a slow technology demand and a wobbly economy, Gateway said PC unit sales decreased slightly in sequential quarters, to 720,000, but increased 6 percent year over year.

The average price for a PC dropped to $1,467 in the three months, down from $1,533 in the third quarter, due to aggressive pricing, low-end system mix and fourth quarter seasonal promotions. These actions also offset any benefits of component cost improvements and increased plasma TV and digital solutions sales. Fourth quarter margin decreased 12.3 percent, while Selling, General and Administrative expenses climbed 23.6 percent.

For the 12 months, Gateway recorded revenue of $4.2 billion, down from $6.1 billion in 2001. Net loss reached $309 million, including a $62 million charge. The figure is down from the $1 billion loss recorded for the year 2001.