Gateway, Inc. (NYSE: GTW) plunged 10 9/16 to 18 15/16 in the first few minutes of trading Thursday after the computer manufacturer said fourth-quarter results will be well below Wall Street estimates.
Because of sluggish demand for personal computers (PCs) this holiday season, revenue for the quarter will be flat at about US$2.55 billion, $500 million lower than previously expected, and earnings per share will be about 37 cents, 25 cents below analysts' consensus forecast, the San Diego, California-based company said.
The company also set a charge for the quarter of $200 million, or 39 cents per share, to cover the write-down of its investments in technology-based companies and other assets. After the charge, the company could report a loss of 2 cents per share.
Results for 2001 will be lower as well, Gateway said, as it slashed its forecast for next year's earnings per share to $1.89 from $2.28.
"We expect consumer sales to continue ramping up this quarter, but it is now obvious to us following the Thanksgiving weekend that they will not grow sufficiently to allow us to meet previous consensus for EPS and guidance for revenue," said chief financial officer John Todd.
"The economic slowdown, coupled with ongoing shifts in PC seasonality, clearly had a significant impact on our sales over the holiday weekend," Todd said. "We expect these issues will continue to have an effect on overall demand over the next 12 to 18 months."
Analysts at Prudential Securities, Lehman Brothers and J.P. Morgan reportedly downgraded Gateway shares after the announcement. Gateway's news, along with a similar warning of a fourth-quarter shortfall from chipmaker Altera Corp. (Nasdaq: ALTR), were said to have spurred an early slide in the overall U.S. stock market as investors worried about a slowdown in the economy.
Altera was down 3 5/16 at 22 5/8.
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