Gateway Inc’s third-quarter results edged out Wall Street expectations as the PC maker benefited from a surge in PC shipments in the back-to-school season and a rise in non-systems revenue. The company posted net income up 40.3% at $113.2m, or $0.35 per share, a penny better than the consensus estimate of analysts surveyed by First Call. Revenue for the quarter jumped 20% to $2.18bn, from $1.82bn in the year-ago quarter.
Gateway said the quarter saw continued momentum across all segments of its hardware business, with more than 30% growth in each one. Overall unit shipments totaled 1.23 million units for the quarter, a 39% year-over-year increase. The company’s consumer segment saw unit sales up 44% and revenue up 27%. Sales in the US business segment, meanwhile, grew 31% and revenue grew 10%, while unit sales to small and medium businesses – which Gateway considers its target business market – grew 43% and revenues rose 26%.
Overall average unit prices for the quarter declined 13.7% from the year-ago period and 7% on a sequential basis to $1,765, due to a changing consumer mix and government seasonality, the company said. Still, gross margins remained flat with the prior quarter at 22.0%. Gross margins in the year-ago period were 20.8% and the company boasts it has now posted seven consecutive quarters of year-over-year margin improvement.
Non-PC income for the quarter exceeded 15% of total revenue, up from roughly 10% last quarter, and is on pace to attain a billion-dollar annual run rate. Subscribers to Gateway.net, the internet service which the company launched in 1997, rose 50% over the preceding quarter to more than 600,000.
On a geographic basis, international markets provided the country with year-over-year unit growth of 55% and revenue growth of 34%. Unit shipments in Asia rose 72% and revenue grew 57%, led by a strong showing in Japan. Europe also posted unit growth of 38% and revenue growth of 11% over the same period last year. Gateway’s retail stores expanded to 238 during the quarter, with 49 of them outside the US.
For the nine-month period, net income rose 39% to $302m on revenue up 20% year-over-year at $6.19bn. Earnings per share rose 38.2% to $0.94 from $0.68 last year. Gateway finished the quarter with cash and equivalents of $1.01bn, down from $1.17bn as of December 31.
