Gateway Q2 lower than Q1

Gateway 2000, after pre-announcing that second-quarter earnings and revenues would be markedly lower than its first-quarter results, reported sales of $1.4 billion and profits of $56.5 million, or 36 per share, in its second quarter. The results matched revised First Call estimates of 36 cents per share, down from the 45 cents expected two months ago.

Personal computer shipments rose from 424,000 units in the second quarter of 1996 to 554,000, a 31 percent increase but were slightly lower than the 555,000 shipped in the first quarter. Gross margins increased a tad to 18.7 percent compared to 18.1 percent in the same quarter last year.

Company officials said increased costs associated with the hiring of sales staff and manufacturing expenditures in anticipation of improved sales in the second half were responsible for the lower-than-expected earnings.

"It's a solid quarter that didn't really surprise anyone," said Peter Labe, an analyst at Buckingham Research Group in New York.

"They are doing everything right to position themselves for a huge second half."

The Sioux Falls, S.D.-based firm's earnings dropped from $67.5 million, or 86 cents per share, in the first quarter.

Gateway's stock dropped $1.56 per share Thursday to $43.19 a day after reaching a post-split high of $44.75 a share.

While Gateway's stock hasn't seen the incredible appreciation that competitors Compaq Computer Corp. and Dell Computer Corp. have enjoyed in the past three weeks, some analysts anticipate similar growth in the weeks and months to follow.

"If I were buying stock, I'd buy Gateway before Compaq or Dell," Labe said. "Those two have already been identified and have taken off. Gateway hasn't been perceived in the same way, but it's holding its own with its competition."