Gateway 2000 Inc – which fixed its nomenclatorial Y2K problem by officially dropping the ‘2000’ from its name – has reported first-quarter figures that were an upside surprise to Wall Street. The North Sioux City, Iowa PC vendor posted net income up 12.4% at $75.9m and earnings per share up 11.6% at $0.48, when the consensus estimate of analysts surveyed by First Call was $0.43. Revenue surged 21.7% to $1.73bn. The company says it shipped 767,000 PCs during the quarter, an increase of 38% from the year-ago quarter. Inventory turns reached an all-time high of 26 and gross margins also hit a new high at 19.5%, up from 18.7% a year ago and 18.0% in the fourth quarter. Margins were buoyed by continued component cost declines and improved inventory turns. Average unit prices decreased 3.1% during the quarter to $2,253 compared to $2,326 in the fourth quarter of 1997 and were down 12.0% from the year-ago quarter. Sales from international operations accounted for 15.4% of total sales. Unit shipments from the EMEA region were up 4.2% from last year, but revenues declined 8.2% and represented 9.4% of total sales in the quarter. Revenues in the Asia/Pacific region were up 31.5% from last year, and were 6.0% of total sales. Shipments of portables rose 51% year-over-year and represented 11.6% of total sales. SG&A expenses increased $12m, or 5.5% over the fourth quarter, and was 13.2% of sales compared to 10.9% in the fourth quarter. On the balance sheet, cash and marketable securities increased roughly $177m, leaving a balance at the end of the quarter of just over $800m. Looking ahead, the company says it’s cautiously optimistic in the short term but thinks momentum will pick up in the second half of the year as a result of marketing investments now being made.
