Gateway's revenue sinks on slow PC sales

Gateway Inc. saw its revenue take a dramatic slide in the fourth quarter as its PC business slowed while the company worked to transform itself into a consumer electronics provider.

Revenue for the fourth quarter of 2003 dropped to $875 million from $1.1 billion a year earlier, Gateway said Thursday. The Poway, California, company reported a net loss of $114 million for the quarter ended Dec. 31, or $0.35 a share. The net loss figures include restructuring and other charges, Gateway said, which accounted for $65 million, or $0.20 a share, of the loss.

This compares to a loss of $72 million, or $0.22 a share a year earlier.

A decline in the company's PC business accounted for some of the loss. Gateway sold 526,000 PCs in the quarter, down 27 percent from the year-ago period. Stiff competition in the low-end PC market and constrained supply of its Media Center PCs affected the shortfall, Gateway said.

In a clear move to boost its PC business, Gateway said Friday that it is acquiring privately held PC company eMachines Inc. for $30 million in cash and 50 million shares of Gateway's common stock. With the buy, Gateway hopes to become the third-largest PC company in the U.S. and the eighth largest PC vendor in the world, it said.

Despite the slowing of its PC sales in the fourth quarter, the company said that it made progress in its consumer segment, which booked revenue of $482 million in the quarter, 13 percent more than in the previous quarter thanks to a line of new products in the category. Consumer-generated revenue was off 22 percent from the year-ago quarter, however, due to decreased consumer PC sales.

For full-year 2003 the company reported revenue of $3.4 billion and a net loss of $526 million, or $1.62 a share.

Gateway hopes to shore up its sales with a range of new consumer electronics products, it said. To this end, it rolled out 46 new products and services in six categories during the quarter. Since announcing its intention to refocus its business on consumer electronics last May, it has added a total of 118 new products and services, Gateway said. Sales growth in liquid crystal displays, plasma lines and digital cameras helped bolster the category's performance, Gateway said.