Revenue and EPS Affected by Continued Slide in Consumer Demand
And Increasing Pricing Pressures
SAN DIEGO, Jan. 11 /PRNewswire/ -- Gateway Inc. (NYSE: GTW) today reported
fourth quarter 2000 and full-year results that were below recently revised
expectations due to a continued deterioration of worldwide PC demand and
increasing pricing pressure, both of which are expected to continue at least
through the first half of this year.
In addition, Gateway today also unveiled a number of actions it is taking
to better position the company for enhanced growth and profitability in the
face of the current demand and macroeconomic realities.
"While Gateway's 2000 results were not as we had hoped, our core strategy
of being a trusted guide for technology and of providing products and services
in addition to the PC -- our beyond-the-box initiative -- is the right
strategy and we will continue to execute against it," said Jeff Weitzen,
Gateway president and chief executive officer. "For now, we need to
prioritize our business initiatives against the present economic realities.
Tough times call for tough decisions. We are confident the steps we are
taking today will make us a stronger company as a result, which will benefit
our employees, clients and shareholders."
In the fourth quarter, Gateway reported a loss of $94.3 million, or
$0.29 per share, including a previously announced $187 million pre-tax charge
to earnings related primarily to the write-down of the company's investments
in technology-based companies and other assets, on revenues of $2.373 billion.
Excluding the unusual charge, Gateway would have reported net income of
$37.6 million, or $0.12 per share. By comparison, Gateway in the fourth
quarter of 1999 reported a profit of $126 million, or $0.38 per diluted share,
on revenues of $2.55 billion. Gateway's reported fourth quarter income and
revenue were both below analyst estimates for the quarter, and were
significantly lower than Gateway expected following a Nov. 29, 2000 news
release.
Gateway's beyond-the-box sales of products and services other than the
PC continued to be a bright spot in the fourth quarter, accounting for 24
percent of revenue and 100 percent of operating income.
"When we pre-announced on Nov. 29, we had expected some continued ramping
of demand in December based on past experience, but that did not materialize,"
Weitzen said. "Softer sales have caused inventories of our competitors to
swell, and have touched off an aggressive pricing environment that will have
negative consequences for the PC sector for the next six months."
Among the steps Gateway announced today to better position the company for
enhanced growth and profitability in the face of the current demand and
macroeconomic realities are:
-- Drive revenue growth by: reinvesting beyond-the-box profits into the
brand to ensure Gateway products and services worldwide represent the
best value in the market; increasing the company's beyond-the-box
attach rates in every geography and market segment worldwide; and
continuing rapid development of products and services to tap the coming
convergence of broadband, content, communications and devices.
-- Improve profitability by streamlining manufacturing, consolidating
vendors and driving productivity through SG&A reductions.
-- As a result of these actions and other restructuring steps, Gateway
will reduce its worldwide employment ranks in the first quarter by more
than 10 percent. As a result, Gateway will take a $50 million pre-tax
charge in the first quarter of 2001.
In response to the continuing deterioration in consumer demand, Gateway
has revised further its year 2001 expectations. In 2001, Gateway expects
revenue growth of 3 percent and operating EPS growth of 6 percent over 2000
results, before the fourth quarter 2000 and first quarter 2001 charges, or
$1.44 per diluted share, reflecting the expected continuation of the present
economic environment through the first half and an expectation of improvement
in the second half of the year.
Full Year 2000
Gateway reported full-year 2000 profits of $315.9 million on revenues of
$9.7 billion, or $0.95 per diluted share, a 28 percent decrease from 1999.
Excluding the previously announced charge, net income for 2000 was
$448 million, or $1.36 per diluted share, a 3 percent increase over 1999.
Full-year 2000 results were impacted by a sharp, unexpected and continuing
reduction in consumer demand that began during the holiday period.
Conference Call
Gateway's year-end conference call, led by President and CEO Jeff Weitzen
and Chief Financial Officer John Todd, will be accessible today via live audio
webcast at 5:30 PM ET/2:30 PM PT at http://www.gateway.com.
About Gateway
Gateway (NYSE: GTW), a Fortune 250 company founded in 1985, focuses on
building lifelong relationships with consumers and businesses through complete
technology personalization. Gateway ranked number one in U.S. consumer PC
revenue in 1999 (1) and was rated among the top ten best corporate reputations
in America according to a survey conducted in August of 1999 by Harris
Interactive and the Reputation Institute and published in The Wall Street
Journal. In 1999, Gateway was seventh in total return to shareholders among
Fortune 500 companies and tenth in total shareholder returns over the past
five years.(2) Gateway employees worldwide provide clients with services and
built-to-order computers that consistently win top awards from leading
industry publications. Gateway had total global revenue of $9.7 billion in
2000. For more information, visit our Web site at http://www.gateway.com
(1) According to GartnerGroup/Dataquest US PC Quarterly statistics.
(2) According to Fortune Magazine, April 17, 2000.
Special Note
The above statements include forward-looking statements based on current
management expectations. Factors that could cause future results to differ
from these expectations include the following: general economic conditions;
growth in the personal computer industry; competitive factors and pricing
pressures; component supply shortages; short product cycles; foreign currency
fluctuations; risks relating to new or acquired businesses and joint ventures;
risks of financing customer orders; infrastructure requirements; risks of
equity investments; changes in product, customer or geographic sales mix;
access to technology; and inventory risks due to shifts in market demand.
Additional factors are described in the Company's reports and other filings
filed with the Securities and Exchange Commission.
Gateway
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three months ended December 31, Year ended December 31,
2000 1999 2000 1999
Net sales $2,373,352 $2,549,723 $9,653,133 $8,964,900
Cost of goods sold 1,930,509 2,011,252 7,570,464 7,127,678
Gross profit 442,843 538,471 2,082,669 1,837,222
Selling, general
and administrative
expenses 487,177 365,311 1,546,033 1,241,552
Operating income
(loss) (44,334) 173,160 536,636 595,670
Other, net 82,315 (18,514) 27,184 (67,809)
Income (loss)
before income
taxes (126,649) 191,674 509,452 663,479
Income tax
expense (benefit) (32,332) 65,685 193,484 235,535
Net income (loss) $(94,317) $125,989 $315,968 $427,944
Net income (loss)
per share:
Basic $(0.29) $0.40 $0.98 $1.36
Diluted $(0.29) $0.38 $0.95 $1.32
Basic weighted
average shares
outstanding 323,252 316,260 321,742 313,974
Diluted weighted
average shares
outstanding 323,252 330,617 331,320 324,421
Gateway
Consolidated Balance Sheets
(in thousands)
December 31, 2000 December 31, 1999
ASSETS
Current assets:
Cash and cash equivalents $483,997 $1,127,654
Marketable securities 130,073 208,717
Accounts receivable, net 648,538 646,339
Inventory 249,404 191,870
Other 807,046 522,225
Total current assets 2,319,058 2,696,805
Property, plant, and equipment, net 897,414 745,660
Intangibles, net 147,581 52,302
Other assets 876,847 459,921
$4,240,900 $3,954,688
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $785,345 $898,436
Accrued liabilities 555,071 609,132
Accrued royalties 138,446 153,840
Other current liabilities 147,476 148,302
Total current liabilities 1,626,338 1,809,710
Long-term obligations,
net of current maturities 2,548 2,998
Warranty and other liabilities 157,190 124,862
Total liabilities 1,786,076 1,937,570
Stockholders' equity 2,454,824 2,017,118
$4,240,900 $3,954,688
SOURCE Gateway Inc.
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Related links:
http://www.gateway.com
CONTACT:
media, John W. Spelich, Public Relations,
858-799-2657, john.spelich@gateway.com, or investor relations,
Marlys D. Johnson, Investor Relations, 605-232-2709,
marlys.johnson@gateway.com, both of Gateway Inc.
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