Gateway Loses $49.7 Million in 3Q

Stiff price competition from Dell continues to erode the company's market share.

PC maker Gateway Inc. on Thursday reported a net loss of $49.7 million for the third quarter, and overall sales continued to decline as stiff price competition from Dell Computer Corp. continues to erode the companys market share.

For the third quarter, Gateway recorded sales of $1.12 billion, a 20 percent decline from a year earlier. Units shipped also declined 19 percent from a year ago, totaling 729,000 for the quarter.

Despite the year-over-year declines, Gateway Chairman and CEO Ted Waitt contended that the companys recent promotional efforts were paying off, as demonstrated by a 12 percent increase in unit sales from the previous quarter.

"Despite a challenging consumer spending environment, our efforts to continue growing the business paid off," Waitt said in a statement issued Thursday. "We continue to deliver progress on our plan to return Gateway to long-term, sustainable profitability and growth."

However, the Poway, Calif., company projected that sales for the fourth quarter would come in below most current projections by market analysts, resulting in another quarterly loss to close out the year.

"We are cautious on our outlook for the fourth quarter given uncertainty surrounding the economy and the holiday selling season," said Chief Financial Officer Rod Sherwood. "However, in spite of challenging economic conditions, Gateway is demonstrating continued momentum … and improved its gross margin and operating expense ratio for the second consecutive quarter."

Gateways average selling price, which is the sum of PC and non-PC products and services sold at the point of sale, was $1,397 for the quarter, a drop from $1,414 in the previous quarter.

Gateway has had only one profitable quarter since the end of 2000, when the company was first rocked by a sudden drop in PC demand. Since that time, its debts have mounted as it has engaged in a costly price war with Dell, of Round Rock, Texas, which has significantly boosted its consumer sales largely at Gateways expense.