Shares of Irvine-based Gateway Inc. slumped 21% Tuesday following a dimmer-than-expected outlook from the personal computer maker.
Gateway lowered its sales and profit guidance for the year on Monday, citing competition and delays resolving tax issues. Its shares were off some 8% after the market closed.
The company said it now expects sales of $3.9 billion to $4 billion for the year, down from the $4 billion to $4.25 billion it earlier expected.
Gateway could earn $45 million for the year, down from an earlier profit expectation of about $59 million.
The company also disappointed Wall Street with its second-quarter results. Gateway reported quarterly sales of $873.1 million, up 4% from a year ago.
Analysts had expected sales of $895 million, a 7% improvement from a year ago.
Gateway reported an operating profit of $17.6 million, helped by $15 million from the company’s recent settlement with Microsoft Corp.
In April, Microsoft said it would pay Gateway $150 million over four years to resolve long-standing antitrust issues.
The company posted net income of $17.2 million, compared to a loss of $338.5 million in the same quarter a year ago.
Gateway is in the midst of a turnaroud bid spearheaded by Chief Executive Wayne Inouye. He came to power after Gateway’s buy last year of low-cost computer seller eMachines of Irvine.
Inouye is looking to adopt eMachine’s lean model at Gateway.
“While we had to contend with gross margin pressure in all our major business units in the second quarter due to competitive pressures, our performance shows we remain on track toward our long-term growth goals and that we continue to make important strides through our highly scalable, low-overhead model,” Inouye said.
“While we have much work to do, we continue to believe we have a model of operational efficiency and customer intimacy that is a winner over the long term,” he said.
