January 5, 2004 2:37 PM PST

Gateway warns of revenue shortfall

Amid tough competition in the PC market, Gateway warned Monday that it will post a wider-than-expected fourth-quarter loss and lower-than-expected sales for the holiday season.

The company said it now expects an operating loss at the low end of its prior expectations, with revenue expected to total about $880 million, short of the $925 million to $975 million the company earlier projected.

Gateway said competitive pressures hurt its traditional PC sales, particularly for notebooks and low-end desktops. The company also said it was not able to supply enough of its Media Center PCs.

On the positive side, Gateway said digital camera sales were up 200 percent in the fourth quarter compared with the third quarter, while TV sales grew 20 percent sequentially. As a result, consumer electronics will make up a significantly greater percentage of total sales for the fourth quarter than it has in prior quarters, something the company said will help boost its margins.

Gateway, which has been struggling for some time, is trying to recast itself as a maker of a wider range of digital devices. However, PC rivals Dell and Hewlett-Packard also are branching into consumer devices. Gateway has tried new avenues for selling its gear, such as through Costco Wholesale, HSN and Office Depot.

Despite its reduced financial outlook, the company remained upbeat, noting that it exited last year with more than $1 billion in cash and marketable securities.

"We're pleased with the progress we're making in driving improvements in our business each quarter," Gateway CEO Ted Waitt said in a statement. "Our branded integrator strategy is working, and in 2004, we intend to continue leveraging that strategy to drive further improvement in our results."

 

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