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Gateway Sales Rise 8%; Moves To Black

Irvine, Calif. — Fourth-quarter revenue at PC maker Gateway increased 8 percent, reaching $1.1 billion, from $1 billion the previous year.

The company moved into the black in the three months, ended Dec. 31, with net income coming in at $22.4 million, compared with a loss of $6.6 million in the same period in 2004. Fourth-quarter results included $13.8 million of benefits.

“While our fourth quarter results were mixed, our retail business continued to post very strong results,” said Wayne Inouye, president/CEO.

The retail business delivered revenue of $792 million, up 31 percent year-on-year. Retail PC-unit volume increased 23 percent from the previous year, hitting 1.1 million. Gateway said dollar increases were due to market-share gains in U.S. retail.

Total non-PC revenue — which includes sales of stand-alone monitors, software, peripherals, accessories and services, but excludes sales of consumer electronics — jumped 25 percent year-on-year. Non-PC sales, excluding CE, represented 19 percent of total revenue in the fourth quarter, compared with a year-earlier 16 percent. Gross margin from non-PC products and services, excluding CE, was up 8 percent from a year ago.

Overall gross margin for the fourth quarter reached 7.7 percent, compared with 8.8 percent a year ago. Retail gross margin in the fourth quarter benefited from a $5.5 million contractual settlement. Declines in gross margin year-on-year were due to lower margins in the company’s professional segment, but stronger growth at retail, which typically has lower margins.

Expenses in the fourth quarter climbed to 7.8 percent of revenue, down from the 10.3 percent in the fourth quarter of 2004.

For the 12 months, Gateway increased to $3.9 billion from a year-earlier $3.6 billion. The company had net income of $49.5 million in the 12 months, compared with a year-ago loss of $567.6 million.

Total PC unit sales for the 12 months were 4.5 million units, up 27 percent over the prior year.