Gateway Sees Profitability

Personal computer maker Gateway Inc. on Monday affirmed guidance to return to profitability in the fourth quarter before taxes and charges, but forecast revenue of $1.16 billion, below expectations.

The Poway, California, company said domestic unit sales fell 15 percent to 700,000 units in the fourth quarter from the third quarter. It had told analysts to expect a sequential increase during the quarter.

The company said that weak unit sales were offset in part by a higher-than-expected average unit price of about $1,660 in the fourth quarter. Higher unit prices and cost cutting contributed to the return to profitability, Gateway said.

``It's clear that a significant portion of market demand was at the very low end of the PC market in the fourth quarter, driven largely by aggressive pricing and promotions,'' said Chief Executive Ted Waitt. ``We stayed focused on our strategy and targeted higher-end customers during the holiday selling season.''

Gateway in 2001 announced plans for a massive restructuring, which included cutting 25 percent of its staff and shutting down all international operations.

The company, which largely sells to the consumer market, was hurt in 2001 by No. 1 PC maker Dell Computer Corp., which mounted an aggressive price war.

In the third quarter, it posted its third straight quarterly loss, having lost $83 million, or 17 cents per share, excluding charges.

Analysts expect the company to lose 1 cent per share in the fourth quarter on revenue of $1.4 billion, according to research firm Thomson Financial/First Call.

Gateway shares were higher during trading on Monday after competitor Compaq Computer Corp. said it would post a profit, not a loss, in the fourth quarter on higher than expected revenues, causing speculation that Gateway too had a strong quarter.

Gateway gained 4.4 percent, or 43 cents, to close at $10.25 in New York Stock Exchange trading.