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Gateway Notches Q4 Sales, Net Profit Losses

Poway, Calif. – Overshadowing such fourth quarter accomplishments as 4 percent comparable store growth 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. The comparable store results were the first year-over-year same-store sales increase for the chain in two years

Gateway, which provided an update on a previously disclosed Securities and Exchange Commission investigation, which it believes relates to accounting from fiscal 2000, said it has been given SEC notice concerning 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.

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 270 basis points, to 12.3 percent, while Selling, General and Administrative expenses climbed 140 basis points, to 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.

Total unit sales for the 12 months were 2.7 million, a 24 percent decline over the prior year. Unit sales dropped 15 percent on a comparable, U.S. only, basis.