It’s hard to believe. But in the latest quarterly results, Irvine-based Gateway Inc. looked better than computer market leader Dell Inc.
While Dell was warning about spotty performance in the third quarter, Gateway turned in its second straight quarter of gains with a stable outlook.
Now, I don’t want overstate this. It’s difficult to compare the two because Dell is so much larger. It takes Dell about seven days to do what Gateway does in a whole quarter.
Still, it’s worth noting Gateway’s report looked good and Dell’s wasn’t so hot.
Dell, which is based in Round Rock, Texas, said late last month it would post revenue of $13.9 billion in the third quarter, down from prior guidance of $14.1 billion to $14.5 billion. The company also said it would come in at the low end of adjusted earnings guidance, around $935 million.
Wall Street naturally didn’t like the news and sent the stock down more than 5% in the following days as a rash of analysts lowered price targets and a few lowered their ratings on Dell.
Gateway reported a net profit of $15 million for the third quarter, versus a charge-laden $59 million loss a year earlier. In the second quarter, Gateway reported $17 million in profits. It hasn’t posted a full year of net profits since 2000.
Sales were up 14% to $1 billion.
Gateway said it is “comfortable” with its prior projection of 2005 revenue of $3.9 billion to $4 billion and yearly profit of about $45 million.
The numbers buoyed investors’ faith in Gateway. The stock has climbed about 20% since with a recent market value of nearly $1.2 billion.
What’s interesting is Dell blamed its shoddy performance on “U.S. consumer and U.K. businesses, which fell short of expectations.”
Gateway doesn’t even have a significant presence outside North America but managed to turn in some solid numbers.
Framingham, Mass.-based market tracker International Data Corp. was more optimistic about the U.S. market, which it said grew 17% on a yearly basis in the third quarter.
Gateway’s market share jumped to 6.4% in the quarter from 5.2% a year ago, according to IDC.
Stamford, Conn.-based Gartner Inc. said Gateway’s market share leapt to 6% during the third quarter from 4.9%.
Both pegged Dell at more than 30% market share.
Gateway is undergoing a massive turnaround effort. Chief Executive Wayne Inouye came to power after Gateway’s buy last year of low-cost computer seller eMachines Inc. of Irvine.
Inouye, a former Best Buy Co. executive, is adopting eMachines’ lean model at Gateway.
Analysts might say one, even two quarters doesn’t a turnaround make. Still, it must be nice for Gateway to brag as the leader stumbles.
Smith Passes on Suns
Orange County almost had another owner of a big-time sports team.
Vincent “Vinny” Smith, chief executive of Aliso Viejo-based Quest Software Inc., recently said he considered buying into the National Basketball Association’s Phoenix Suns last year.
“I was a couple hours from doing it,” Smith said.
But Smith said he couldn’t bring himself to do it. The NBA’s growth rates are mediocre at around 10% annually in the past couple of decades, compared to the software industry’s 20% or better. Other industries are growing even faster.
“10%? That’s boring,” he said.
Instead, San Diego’s Robert Sarver, a Tucson native and chief executive of Las Vegas-based Western Alliance Bancorporation, lead a team that bought the Suns for $400 million, a record price for an NBA team.
Smith made his comments earlier this month during a speech at the University of California at Irvine’s Center for Entrepreneurship and Innovation in connection with the Paul Merage School of Business.
Smith didn’t pull punches. He said pro basketball, baseball and hockey have weak growth rates, and that pro football is the only sport with strong gains. The only problem with NFL teams is they’re too pricey, he said.
If Smith had pulled the trigger on buying the Suns, he would have been the county’s second major sports team owner, after Broadcom Corp.’s Henry Samueli, who owns the Mighty Ducks of Anaheim with wife Susan. Arte Moreno, owner of the Los Angeles Angels of Anaheim, lives in Phoenix and La Jolla. Another OC resident, Jeff Moorad, owns a stake of the Arizona Diamondbacks, where he is chief executive.
Closing a Chapter
Irvine-based Composite Technology Corp. no longer is in bankruptcy.
The developer of cables for electric transmission and distribution lines said Oct. 31 it had emerged from Chapter 11 after its plan for paying all of its creditors got the green light from the courts.
It was pretty quick. The company filed less than six months before on May 5.
Composite had said at the time of the filing it went into Chapter 11 to resolve several litigation matters.
Just prior to the hearing, the company agreed to transfer 6.5 million shares to settle the claims.
“We entered into our Chapter 11 reorganization to enable us to resolve our litigation liabilities and to send a clear signal to our customers that as we look beyond today’s hearing, the past liabilities of the company have been predominantly clarified,” Chief Executive Benton Wilcoxon said in a statement.
