Gateway reports $72m quarterly net loss

PC manufacturer Gateway reported a net loss of $72m (£44m) for the fourth quarter of 2002, blaming part of the loss on a dispute...

PC manufacturer Gateway reported a net loss of $72m (£44m) for the fourth quarter of 2002, blaming part of the loss on a dispute with America Online (AOL) over commission payments.

Net sales for the quarter were $1.06bn (£641m), down from $1.14bn for the same quarter last year. Net sales for the full year were $4.17bn.

PC sales volume rose 6% year on year, but dipped slightly compared with the previous quarter, to 720,000 units. Notebook sales rose 40%.

For the full year, Gateway sold 2.7 million PCs, 24% less than the previous year. This figure was affected by Gateway's closure of sales locations outside the US, while sales in the US fell by only 15%.

Average PC selling price dipped to $1,467, compared with $1,533 in the third quarter, because of customer seasonal promotions and customers' preferences for low-end systems.

Gateway installs AOLs client software on all new PCs, and AOL pays Gateway a commission for introducing new subscribers to its service.

In the fourth quarter, AOL unilaterally recalculated commissions due for 2001 and the first half of 2002, and withheld payment in the fourth quarter to recoup the earlier overpayment.

Gateway disputed the recalculation, but was uncertain it would be able to collect the withheld payment, so has reduced its 2002 revenue by a corresponding amount. The company also expected future revenue to be reduced by $3m (£1.8m) to $5m (£3m) a quarter as a result of the changes in AOL's calculations.

An investigation by the US Securities and Exchange Commission (SEC) will not affect 2002 financial results. The company believed the SEC investigation relates to its 2000 financial results.

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