Gateway Q1 Fueled by Strong US Consumer Sales

Computergram International, April 23, 1999

Gateway Inc posted another strong quarter as the direct marketer of PCs saw revenue grow 22% to $2.1bn and unit shipments jump 42% to nearly 1.1 million. Net income for the quarter rose 31.2% to $99.6m and earnings per share were $0.62, beating the First Call consensus by $0.02. The company says the growth was fueled largely by 61% unit growth in the US consumer segment - roughly triple the overall industry growth rate in that market - which led to Gateway taking in 25% of all US consumer PC revenues.

Gateway says its business model was clicking on all cylinders, with strong sales by phone, web and retail stores and increased investment in advertising. In the US market overall, unit volume increased 42% year-over-year, while revenue rose 23%. Asia- Pacific also gave a huge boost to the quarter, with total unit volume up 96% over 1998 and revenues up 65%. In Europe, however, the company blamed a softness in corporate sales for flat unit growth and revenues that sank 13%.

Desktop unit growth was up 42% with revenues up 23%, while portable unit volume was up 47% with revenues up 23%. Due to ongoing pricing pressure, average unit prices dipped 3% to $1,938 from $2,003 in the fourth quarter of 1998. AUPs were down 14% from $2,253 in the year-ago quarter of last year. Despite that, gross margins for the quarter were 21.4%, up from 19.5% last year and essentially flat with the fourth quarter - the fifth consecutive quarter of year-over-year margin improvement, Gateway boasts.