Gateway Inc. today reported fourth quarter 2000 and full-year results that were below recently revised expectations due to a continued deterioration of worldwide PC demand and increasing pricing pressure, both of which are expected to continue at least through the first half of this year.
In addition, Gateway today also unveiled a number of actions it is taking to better position the company for enhanced growth and profitability in the face of the current demand and macroeconomic realities.
While Gateway’s 2000 results were not as we had hoped, our core strategy of being a trusted guide for technology and of providing products and services in addition to the PC — our beyond-the-box initiative — is the right strategy and we will continue to execute against it, said Jeff Weitzen, Gateway president and chief executive officer. For now, we need to prioritize our business initiatives against the present economic realities. Tough times call for tough decisions. We are confident the steps we are taking today will make us a stronger company as a result, which will benefit our employees, clients and shareholders.
In the fourth quarter, Gateway reported a loss of $94.3 million, or $0.29 per share, including a previously announced $187 million pre-tax charge to earnings related primarily to the write-down of the company’s investments in technology-based companies and other assets, on revenues of $2.373 billion. Excluding the unusual charge, Gateway would have reported net income of $37.6 million, or $0.12 per share. By comparison, Gateway in the fourth quarter of 1999 reported a profit of $126 million, or $0.38 per diluted share, on revenues of $2.55 billion. Gateway’s reported fourth quarter income and revenue were both below analyst estimates for the quarter, and were significantly lower than Gateway expected following a Nov. 29, 2000 news release.
Gateway’s beyond-the-box sales of products and services other than the PC continued to be a bright spot in the fourth quarter, accounting for 24 percent of revenue and 100 percent of operating income.
In response to the continuing deterioration in consumer demand, Gateway has revised further its year 2001 expectations. In 2001, Gateway expects revenue growth of 3 percent and operating EPS growth of 6 percent over 2000 results, before the fourth quarter 2000 and first quarter 2001 charges, or $1.44 per diluted share, reflecting the expected continuation of the present economic environment through the first half and an expectation of improvement in the second half of the year.
Gateway reported full-year 2000 profits of $315.9 million on revenues of $9.7 billion, or $0.95 per diluted share, a 28 percent decrease from 1999. Excluding the previously announced charge, net income for 2000 was $448 million, or $1.36 per diluted share, a 3 percent increase over 1999. Full-year 2000 results were impacted by a sharp, unexpected and continuing reduction in consumer demand that began during the holiday period.
