Gateway at a Loss—Again

The struggling PC maker warns that its losses for the third quarter will be worse than previously projected as a result of a collapse in sales that followed the terrorist attacks; this will be its fourth consecutive quarterly loss.

Struggling PC maker Gateway Inc. warned Thursday that its losses for the third quarter will be worse than previously projected as a result of a collapse in sales that followed terrorist attacks in New York and Washington.

The disclosure marks another setback for the troubled computer maker, whose founder, Ted Waitt, ousted the companys previous management team in January and has struggled ever since to stem mounting losses.

``The impact of the events around Sept. 11 was clearly significant," said Waitt, Gateways chairman and chief executive, in a conference call with market analysts Thursday. "We saw a pretty significant impact to our demand in the consumer segment. We saw impact to our demand in the government segment, as well as in the business segment."

Gateway now expects to post a loss of 14 to 17 cents a share for the quarter, excluding one-time charges. Thats sharply lower than previous Wall Street projections of a loss of 4 cents per share, according to analysts surveyed by Thompson Financial/First Call.

The San Diego-based PC maker also warned that its projected $475 million one-time charge against earnings this quarter may have to be increased to $605 million.

Despite the companys poor numbers, Waitt said he remains confident that the PC maker will be able to return to profitability next quarter, which is traditionally the companys strongest earnings period of the year.

"Were starting to see business normalize again, and were hopeful that weve seen the worst of the impact from those events," Waitt said. "Weve made tremendous progress on our restructuring plans over the past 30 days, and we remain on track to return to profitability in the fourth quarter."

In its bid to dramatically reduce operating expenses, Gateway in recent weeks has closed most of its overseas operations and reduced its work force by 25 percent, totaling about 8,000 employees.

Since taking back the reins of the company he founded in 1985, Waitt has launched a variety of business initiatives and internal restructurings to rekindle sales and reduce operating costs. But the computer makers heavy reliance on the consumer market, and PC sales in general, left it with little room to maneuver following the collapse of PC demand late last year.

The companys earnings were further undermined by an ongoing price war among major PC makers. This summer, Gateway launched and soon pulled a match-any-price ad campaign after critics blamed the initiative for further eroding $500 million in revenue.

Once its third-quarter numbers are totaled, Gateway will have posted its fourth consecutive quarterly loss.