Gateway's Stepping Out

There was a time when digesting Gateway's sorry financials was best left to its famous cow -- one stomach for each quarter. But, at last, the ailing computer maker's prognosis has improved.

Gateway is still losing money, last night posting a wider loss of $0.43 a share on a 20% slide in third-quarter revenues. Thankfully, the company is still cash rich. With $1 billion in greenbacks -- a little more than half the total market cap.

So what will last longer? Gateway's money or its ability to dream out loud? Gateway has started thinking outside the box this year, practically conceding the personal computer market to Dell (Nasdaq: DELL  ) and Hewlett-Packard (NYSE: HPQ  ) .

Check out the company's home page and you'll see digital cameras and plasma televisions taking up prime real estate. You also see an emphasis on laptops, which is significant for a company that promotes free shipping -- after all, what's a laptop's shipping weight compared to its clunky siblings. The company rolled out 58 new products in 13 new categories this past quarter. That's one busy heifer!

At least the market believes in Gateway again. The shares have nearly tripled off their February lows. But while watching Gateway take baby steps into new markets is a welcome sight for animal lovers and makeover investors, proceed with caution. Gateway hasn't managed to turn a profit in personal computers in recent quarters, while rivals like Dell and Apple (Nasdaq: AAPL  ) have. Yes, the company's high-end products look impressive, but there is still no guarantee that they will be profitable.

That being said, the company is projecting a return to its former cash flow positive ways in the current quarter. The cash balance held the floor when Gateway was in a rut, will the potential raise the roof? Maybe, but it's fair to ask for some assurance before buying into the dream.