The problem with writing about Gateway
Story One: Gateway cannot compete successfully with the likes of Dell
Story Two: Gateway is conducting a fighting withdrawal from the PC wars and girding itself for battle on the consumer electronics front. Despite continuing losses, the company is husbanding its cash and remains a value play, or "green gene stock" if you will. If for no other reason, it's worth investing in because its market capitalization is nearly equaled by its cash and equivalents, minus its long-term debt.
Much as the company's stockholders may have hoped otherwise, Thursday's earnings announcement for the fourth quarter and full-year 2003 fails to rewrite the story. Yes, the company continues to bleed red ink throughout its self-surgery. (Indeed, things may be worse than the text of the earnings announcement explains, as the company's balance sheet suggests that part of the year's narrowed losses is due to tardiness in paying its debts. Accounts payable rose from $279 million to $416 million over the past year -- a 49% increase.)
And yes, Gateway still has about $3.02 per share in net cash ($2.41 if you count its preferred shares as long-term debt), versus a stock price of just over $4.
So if there's a story worth telling here, it's one of hopeful fantasy. Gateway's 5-megapixel digital camera has garnered glowing evaluations, and consumers seem to have noticed this. The company reported that sales of Gateway digital cameras shot up 200% between Q3 and Q4 and were still accelerating, with November's sales doubling again in December's crucial holiday shopping season.
Now, I happen to know of another company that is interested in expanding within the digital photography market, is profitable and free cash flow positive, but in need of a big pile of cash to help pay down its $2 billion debt. What are the chances that, if Gateway hung out a "For Sale" sign, Eastman Kodak