If you can't stomach Gateway's
Yes, the company is revising its full-year financials. Instead of earning $49.5 million -- or $0.13 a share -- last year, Gateway will now be recording a profit of just $0.02 a share for 2005. Last night's takedown was due to a pair of charges. The first item involves a legal settlement with Hewlett-Packard
In the end, Gateway can still claim to have posted its first annual profit in five years. The charges don't change the company's fundamentals. More importantly, the challenges remain the same as well.
Since its acquisition of eMachines two years ago, Gateway has been able to grow its retail business. Yes, I'm talking about organic growth, too. This past quarter, Gateway moved 13% more units than it did in the holiday quarter of 2004, with eMachines serving as a part of the Gateway family in both periods.
However, the one troubling aspect of scooping up eMachines is that making a bold move into the discount retail market has hurt the brand in its corporate and direct-selling operations. That's important because it's where the higher margins can be found.
Maintaining profitability -- and greenery -- is important to Gateway, since the shares aren't trading for a whole lot more than the $1.43 in cash that the company had at the end of December. The company may never approach market leaders Dell
Things will get interesting later this year when Microsoft
Yes, the grass is always greener at the other side of the Microsoft release. It's why the Gateway farmland cows may be grazing merrily, knowing that they can stomach the bad news four times over.
Dell and Microsoft are Inside Value picks. Dell is also a Stock Advisor selection.
Longtime Fool contributor Rick Munarriz does have a pair of Gateways in his house, though he favors working on his HP computer and Dell monitor. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy . Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.