Gateway Inc, nee Gateway 2000 Inc, the PC-direct sales company now trading minus its cow logo and impending date tag in an attempt to be taken seriously by business customers, has suffered slow PC demand and high marketing costs through the second quarter, cutting into net profit growth. Net earnings were up 7.5% at $61m while revenues rose by 16% to $1.62bn. The per share earnings of $0.38 were significantly below Wall Street’s expectations and in its last quarter to April, rival PC seller Dell Computer Corp grew net earnings by 54%. Gateway CEO Ted Waitt tried to forestall any adverse reaction from investors with promises of an improved second half to the year. The company said improved trading in the last part of the quarter through June had created an 18% hike in order backlogs, setting the stage for a better third quarter. But soft demand in April and May had caused the current shortfall. Better gross margins were achieved through changing the product mix but this was upset by a 40% increase in selling and general administrative expenses as the company spent heavily on a marketing initiative to increase brand awareness. The company shipped 736,000 PCs in the three months, up from 554,000 in the same period last year but the average unit price declined 12.5% to $2,200 down 2.4% sequentially. Asia Pacific sales were strong but problems came from Europe, which saw revenues decline by 22%. Although the results were announced after the close of markets, Gateway’s shares closed down 5% amidst a general sell off amongst equities in the technology sector.
