Gateway Inc. could be headed for a tough report when it details the second quarter next month.
Early signs for the Irvine-based computer maker aren’t all that positive.
Dell Inc. dropped a bomb on the industry a little more than a week ago when the computer maker said it would fall short of analysts’ estimates of $727 million in profit for the second quarter. It estimated it would pull in $523 million or as little as $477 million.
Revenue expectations were a bit more in line with estimates. Dell said it should reach $14 billion in revenue compared to estimates of $14.2 billion.
Dell’s dominance in the PC market got investors worried about other computer makers, including Gateway.
The day of the announcement, Gateway’s shares dropped 7.4% to $1.75. That wasn’t as bad as Dell’s decline of slightly less than 10%.
Dell said in the company’s warning release that the change in expectations stemmed from “aggressive pricing in a slowing commercial market worldwide.”
Dell Chief Executive Kevin Rollins also told the company’s shareholders that it is facing more challenges as competition in the computing industry has become “more intense,” according to MarketWatch.com.
The Dell news came just two days after computer chip bellwether Intel Corp. said revenue was going to come in below expectations. It anticipates sales in the third quarter of $8.3 billion to $8.9 billion, compared to analysts’ estimates of $9 billion.
One thing possibly working in Gateway’s favor: Though it is trying to extend its global reach, Gateway’s market still is primarily in the U.S.,unlike Dell and Intel, which cover the world.
Gateway was No. 3 in the U.S. with 16.7% growth in PC shipments in a recent report by Framingham, Mass.-based International Data Corp. (Gateway doesn’t show up in the top five for global sales).
But Gateway’s market share in the U.S. fell to 6.5% from 8% in the first quarter.
With lower prices, No. 1 Dell expanded its market share from 32.3% in the first quarter to 34.2% in the second quarter. No. 2 Hewlett-Packard Co. was basically flat, while Apple Computer Inc. and Lenovo Group Ltd. also gained market share.
IDC said U.S. sales grew at 6.7% in the second quarter “on aggressive competition among the market leaders,” compared to 5.3% growth in the first quarter. Sluggish European sales slowed global market growth, putting it at slightly less than 10% compared to nearly 13% in the first quarter.
Gateway’s interim chief executive, Rick Snyder, said in a recent interview with the Associated Press that demand for computers is slightly slower than normal patterns, but still is “pretty good.”
In the same interview, Snyder said the company is on track to name a permanent chief executive by late September or early October.
Analysts estimate Gateway will hit $1 billion in revenue in the second quarter, an increase of nearly 15% from a year ago, while profit is expected to be $7.4 million, a 60% decline from the year-ago period.
That’s not to say the PC maker might surprise on the upside in the quarterly report. Gateway has done it before, though it got some bad news recently: It was dropped from the S & P; 500 index.
Get Googling
Google Inc. could be making good on its intentions for dMarc Broadcasting, with recent talk that Google soon will sell radio ads through its AdWords business.
Google gobbled up what was then Newport Beach-based dMarc Broadcasting earlier this year.
The search company initially paid $102 million for dMarc and could pay as much as $1.1 billion more if it hits targets.
Google’s plan was to combine dMarc’s technology with its AdWords operation, so the companies could send targeted ads to radio listeners.
DMarc’s software and devices are used by radio stations to send messages to listeners. The system also allows stations to more easily schedule and deliver ads and keep track of when they air. The unit now is housed in a site in Irvine with Google’s Southern California’s AdWords sales employees.
According to TechToolBlog, Google could begin selling radio ads via AdWords.
“Don’t be surprised to see Google selling radio ad spots through their AdWords center in the not-so-distant future,” the blog said.
Broadcom’s Quarter
I might have talked about the resilience of Irvine-based Broadcom Corp.’s stock in last week’s column, but the second quarter report,or lack thereof,didn’t sit well with investors.
The company’s stock fell more than 10% in one day, July 21, after Broadcom said revenue climbed 56% in the second quarter. The hitch: Broadcom delayed reporting its earnings results, pending an investigation into stock option grant timing.
The company didn’t say when the full results would be released for the second quarter. Broadcom said earlier that it might take a $750 million charge to past earnings to reflect option grants going back several years.
The chipmaker reported revenue of $941 million during the quarter, missing analyst estimates of $942 million. Broadcom’s first-quarter revenue was $901 million.
