Gateway Warns of Weak Holiday Sales

SAN DIEGO (AP) â€” Shares of Gateway Inc. plunged 34 percent Wednesday after the personal computer maker warned that holiday sales will be weaker than expected. <br><br>The San Diego-based company said

Thursday, November 30th 2000, 12:00 am

By: News On 6

SAN DIEGO (AP) â€” Shares of Gateway Inc. plunged 34 percent Wednesday after the personal computer maker warned that holiday sales will be weaker than expected.

The San Diego-based company said that operating income for the three months ended Dec. 31 is expected to be about 37 cents per share, 25 cents below a consensus estimate of analysts surveyed by First Call/Thomson Financial. Last year, Gateway earned 42 cents a share in the fourth quarter.

Gateway shares fell $10.70, or 34 percent, to $20.30 on the New York Stock Exchange as investors pummeled the stock following release of the news. During the after-hours session, Gateway picked up 20 cents to $20.50.

Other technology stocks fell as well. After finishing at $21.81 in regular trading on the Nasdaq Stock Market, Dell Computer Corp. dipped to $19.87 in after-hours trading. Intel Corp. fell 11 percent in after-hours trading to $37.75 after a 1.7 percent rise in regular trading Wednesday.

Microsoft Corp. and Cisco Systems Inc. dropped as well. Microsoft, which had been down 2.9 percent at $65.06 in regular trading, dropped an additional 3.9 percent to $62.50.

Art Russell, senior technology analyst from Edward Jones Co. in St. Louis, said he was surprised that the preannouncement came just one weekend into the holiday shopping season.

``I'm sure somebody went to work Monday morning, saw the numbers and fell out of their chair,'' Russell said. ``The consumers just didn't show up.''

But he added he believes the disappointing sales are just a lull in the market, in which consumers are deciding to hang onto their old PCs and buy other electronic devices instead. The market will pick up again once an emerging technology â€” perhaps home networking â€” re-energizes it, he said.

With estimates of 130 million PCs being sold this year and 150 million in 2001, ``clearly that market is not gone; it's just moving at a slower pace,'' Russell said.

Gateway relies more on holiday sales than much of the PC market, Russell said. It is less diversified and more driven by home computer sales than more business-focused manufacturers such as Dell and Compaq, which took sales hits of their own at the beginning of the year, when Y2K-driven spending on technology upgrades dried up.

Gateway blamed its revised estimate on ``considerably weaker-than-expected consumer holiday sales of personal computers.''

``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 (estimates),'' Gateway chief financial officer John Todd said in a statement.

``The economic slowdown, coupled with ongoing shifts in PC seasonality, clearly had a significant impact on our sales over the holiday weekend. We expect these issues will continue to have an effect on overall demand over the next 12 to 18 months.''

The company said it expects to report revenue of approximately $2.55 billion for the fourth quarter, about equal to the same period last year, and $500 million below previous estimates.

Gateway, which provides built-to-order computers and support services, had total revenue of $8.65 billion in 1999.

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On the Net: http://www.gateway.com