Gateway moves back into profit

Despite reporting a loss in the third quarter, Gateway made significant progress in turning its business around as it recorded...

Despite reporting a loss in the third quarter, Gateway made significant progress in turning its business around as it recorded its first operational profit since 2001.

The company's third-quarter net loss was $59m (£32m), down sharply from the Gateway's $139m net loss in last year's third quarter and its $339m net loss last quarter.

But excluding restructuring, transformation, and integration costs related to Gateway's eMachines acquisition, the company recorded a $4m profit.

Gateway has slashed headcount and simplified its operations in an attempt to become more like eMachines, the company it acquired earlier this year. New Gateway president and chief executive officer Wayne Inouye built a successful low-cost PC business at eMachines and is bringing that same emphasis on reducing expenses to Gateway.

The company has consolidated its suppliers and moved more of its PC manufacturing to contract manufacturers in Asia-Pacific, like many of its competitors in the PC market. This move cut the cost of building a desktop PC by 7%, Gateway said.

Third-quarter revenue was up 3.6% to $915m, compared with $883m in revenue in last year's third quarter. Retail sales accounted for $408m in revenue as the company introduced new Gateway-branded desktops and notebooks in retail stores to complement the eMachines retail distribution model.

Gateway expects to break even in the fourth quarter, or post a slight profit, it said. Revenue is expected to increase to between $975m and $1.025bn in what is usually the strongest quarter of the year for PC sales.

Tom Krazit writes for IDG News Service

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