Gateway Warns Q3 Loss To Be Worse Than Expected

Gateway (NYSE: GTW) said Thursday that its third-quarter loss will be far worse than earlier Wall Street's expectations and blamed the shortfall in part on a drop in demand following the September 11th terrorist attacks on the United States.

The No. 4 computer maker also said it would take a charge of $100 million to $130 million in Q3, in addition to previously announced restructuring charges. The San Diego, California-based company has been in a heated price war with rival PC-maker Dell (Nasdaq: DELL) in recent months.

"An already tough operating environment got a lot tougher over the past several weeks," Gateway chairman and chief executive officer Ted Waitt said, according to published reports.

Bad News After Good

Gateway's announcement broke a short string of positive reports in a tech sector that has been desperate for good news.

Earlier Thursday, Dell said that it was on target to meet its previous guidance for the third quarter, even taking into account the September 11th attacks. Dell chairman and chief executive officer Michael Dell said that while industry conditions remain difficult, his company's strategic, operating and financial position "is better than it's ever been."

Wednesday, tech stocks rallied on the basis of similar statements reportedly made by CEO John Chambers of Cisco (Nasdaq: CSCO) at a Goldman Sachs investment conference. Chambers said he was "comfortable with the consensus estimates" for Cisco's first quarter of fiscal 2002.

Gloomy Times

The news, of course, has not been all good, as the Gateway announcement echoes a warning issued earlier this week by Compaq Computer (NYSE: CPQ), which said that its September quarter would fall short of estimates. Gateway itself announced job cuts and plant closings in late August.

Gateway's third-quarter earnings are scheduled to be released October 18th.

After the Bell

After closing at 1460.71 on September 27th, the Nasdaq hit a five-day winning streak, finishing Thursday at 1597.31. The Nasdaq has risen 9.4 percent in that period, though it had downward momentum toward the end of trading Thursday.

Gateway's stock closed at US$4.85, up 15 cents.