At a Credit Suisse First Boston conference in December, Gateway said it would need a big boost from pre-Christmas sales to reach the $1.2bn figure.
Gateway this week warned that it was evaluating a dispute with a major partner, which could result in additional losses. The company provided no other details.
Shipments for the fourth quarter are projected at 720,000 units, a 5% increase over the same period last year, Gateway said. However, revenue declined 6% from last year as Gateway fought for market share.
The company has been offering many promotions to boost computer sales, including one in which it offered a free low-end desktop with the purchase of a high-end desktop or notebook PC. This aggressive promotional activity offset the benefit of cost reductions during the quarter, Sherwood said.
A new grid computing service was also recently introduced by the company, in hopes of creating new sources of revenue from otherwise idle in-store display PCs.
Users will pay to access a network of the display models, which are typically Gateway's most advanced PCs.