Investors milked the news for all it was worth, having bid shares up more than 18% in a recent check, and while I can understand that many people want to see Gateway become a turnaround play, the enthusiasm runs the risk of being overdone and premature.
Gateway said it will post a loss of $0.13 to $0.14 per share, a bit narrower than the loss of $0.15 per share it had previously expected (and that's not including restructuring and transformation costs). Meanwhile, revenues will be 9% better than previously expected, coming in at $860 million to $880 million.
Improving sales aren't exactly rocket science in the current climate, though. As Fool contributor Tim Beyers recently pointed out, the time's about ripe for folks to trade up -- hardly surprising, with consumer confidence improving and a lot of people having held on to their old clunkers during the recession. That's the kind of climate that's sure to help Gateway, but also boosts rivals Dell
Speaking of rivals, Motley Fool Stock Advisor pick Dell is a force to be reckoned with, and one of the reasons Gateway's had it tough. After all, Dell's aggressive on price and participates in many of the same markets as Gateway. (Just yesterday, Dell said it plans its first plasma TV, and is expanding the number of kiosks through which it peddles its wares through hands-on consumer test drives.)
Foolish colleague Seth Jayson said when Gateway shuttered its retail operations that it may have closed the door on one of the few things that may have kept it from blending in with the competing electronics that clutter the shelves of every Best Buy
Fans tend to point out several things: Gateway's recent acquisition of eMachines, as well as the addition of Wayne Inouye as CEO, a former executive from Best Buy known for instituting a turnaround at eMachines. Also, the defense likes to cite Gateway's cushion of cash.
The stock's increase today reflects a lot of enthusiasm, enthusiasm I don't think Gateway deserves just yet. While Gateway may indeed be able to turn itself around, when it comes to buying in now, it seems there's just not enough evidence that the cow's come home yet.
Is there a real turnaround under way at Gateway? Talk to other Fools on the Gateway discussion board.
Alyce Lomax does not own shares of any of the companies mentioned.