BREAKFAST WITH THE FOOL
Thursday, January 6, 2000
"Men do not realize how great an income thrift is."
-- Cicero
Still Gateway, Only at a Better Price
By
Richard McCaffery (TMF Gibson)
Many people know that Warren Buffett, perhaps the greatest investor of all time, once said, "As far as I am concerned, the stock market doesn't exist. It is there only as a reference to see if anybody is offering to do anything foolish."
Look at what the market did to Gateway (NYSE: GTW) last night.
The world's number two direct-sales computer maker said it won't meet estimates because of a microprocessor shortage and a lag in business sales because of Y2K concerns.
The company expects to report earnings (minus a one-time charge) of about $0.37 per share, which is $0.07 shy of estimates. Revenues should come in around $2.45 billion, up 6% from last year. The company will report its earnings on January 20.
After the news Gateway's stock dropped $7 3/4 to $55. So a great company has a rough quarter because of problems outside its control, and gets thrown for a 12% loss?
That reaction is like a coach pulling his star quarterback early in the first quarter because he gets sacked. It makes no sense to anyone who wants to win the game, but it happens all the time.
John Todd, Gateway's senior vice president and chief financial officer, said the company plans to address the microprocessor issue quickly, which means Gateway will probably start buying additional computer chips from Intel (Nasdaq: INTC) and Advanced Micro Devices (NYSE: AMD), Bloomberg reported.
Meanwhile, Gateway continues executing its strategy to become a lot more than just a computer maker. In the fourth quarter it doubled the number of subscribers signed up for its Internet service with America Online (NYSE: AOL). It now provides Internet access services to more than 1 million customers. In the third quarter, non-PC income exceeded 15% of total income.
Gateway also reported that average unit prices were higher sequentially in the fourth quarter and that it expects to beat analysts' margin expectations. The company is on its way to eight consecutive quarters of year-over-year margin improvement.
Most coaches don't want a player like that sitting on the bench.
News to Go
Internet software retailer Beyond.com (Nasdaq: BYND) fell in after-hours trading after announcing that fourth-quarter revenues will be lower than expected because of slow consumer sales. The company is trying to make the switch from focusing on consumers to focusing on sales to businesses and governments.
Shareholders of Cleveland Indians Baseball Co. (Nasdaq: CLEV) will receive around $22.61 a share as the team is sold to Lawrence Dolan and Dolan Family Trusts, Bloomberg reported. The team is being sold for a record $320 million.
High-speed Internet access service company Excite@Home (Nasdaq: ATHM) shook things up this morning by announcing free Internet access service as a way of building its customer base. Under the program, called FreeWorld, the company will offer free narrowband Internet service in an effort to lure customers to its paid-for high-speed services.
After more than two years as interim chief executive at Apple (Nasdaq: AAPL) and an amazing turnaround, Steve Jobs took the "interim" off his title, a sign he plans to stay awhile. Jobs also unveiled a new Macintosh operating system and an Internet strategy that involves a $200 million investment in EarthLink (Nasdaq: ELNK).
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