Shares of Gateway Inc. fell more than 6 percent on Wednesday, a day after the personal computer maker warned of a larger quarterly loss than expected and analysts widened their 2003 loss estimates several fold.
While the entire PC industry has suffered from slower demand in the past two years, analysts noted that the company -- which has 270 Gateway Country Stores and sells only directly to customers -- faced many problems of its own making.
"We remain convinced that no combination of everyday pricing and occasional promotions will return Gateway to profitability given its current cost structure -- the company needs to close stores," Salomon Smith Barney analyst Richard Gardner wrote in a research note.
Gateway was also losing market share to rivals such as market leader Dell Computer Corp. and No. 2 computer maker Hewlett-Packard Co. that have aggressively adopted its strategy of selling directly to customers, analysts said.
Gateway said after the market closed on Tuesday that it expects to post a fourth-quarter loss of 18 cents to 19 cents instead of 13 cents a share. It lowered its revenue estimate to of $1.06 billion, almost 12 percent below its prior "best-case" forecast of $1.2 billion.
"This is not a big surprise given their (Gateway's) comments in early December, restructuring actions and poor positioning against Dell and rapidly improving HP," wrote Dan Niles, an analyst at Lehman Brothers.
News source: The Washington Post
While the entire PC industry has suffered from slower demand in the past two years, analysts noted that the company -- which has 270 Gateway Country Stores and sells only directly to customers -- faced many problems of its own making.
"We remain convinced that no combination of everyday pricing and occasional promotions will return Gateway to profitability given its current cost structure -- the company needs to close stores," Salomon Smith Barney analyst Richard Gardner wrote in a research note.
Gateway was also losing market share to rivals such as market leader Dell Computer Corp. and No. 2 computer maker Hewlett-Packard Co. that have aggressively adopted its strategy of selling directly to customers, analysts said.
Gateway said after the market closed on Tuesday that it expects to post a fourth-quarter loss of 18 cents to 19 cents instead of 13 cents a share. It lowered its revenue estimate to of $1.06 billion, almost 12 percent below its prior "best-case" forecast of $1.2 billion.
"This is not a big surprise given their (Gateway's) comments in early December, restructuring actions and poor positioning against Dell and rapidly improving HP," wrote Dan Niles, an analyst at Lehman Brothers.
News source: The Washington Post
The timing of the outage was particularly bad, coming as it did at the opening of business on the East Coast of one of the biggest business days of the year, as people returned from holiday vacations. "It's a time when people are coming back to work. When systems fail, it's a double insult. This was the worst time for something like this to happen," Gardner said. "There might have been a small technical reason for this that will be easily fixed, but the perception among users will be, `I needed tis, and they weren't there for me.'" Moreover, switching to an alternative instant message provider is easy, Gardner said. "The market will be harsh to those that don't perform well, because the cost of switching is so very low," he said.
Surprisingly, Microsoft agreed.
"We agree that a large degree of reliability is necessary," Grothaus said. "We are taking steps to see to it that we don't see outages like this again."
But Michael Sampson, analyst with Ferris Research, said the impact of the outage on Microsoft will not be significant. He said Microsoft's instant message service had a July 2001 outage that lasted eight days.
"It's certainly not good for Microsoft, but those people that are wedded to MSN will keep using it. If they were paying for it, they would be a bit more annoyed," Sampson said.
It's uncertain just how many users were affected. Sampson said he estimates that Microsoft and America Online are the instant message market leaders, with about 30 million to 35 million active users each. AOL claims it has 180 million registered users, and Microsoft says it has 75 million, but many of those accounts are duplicates -- more than one account per person -- and inactive.
Microsoft will likely become market leader because of its instant message technology being included in Windows XP; when users register XP they are strongly urged to sign up for an MSN Messenger and Passport account, Sampson said.
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