updated 1/29/2004 8:02:55 PM ET 2004-01-30T01:02:55

Gateway Inc. saw its fourth-quarter losses widen because of a sharp sales drop and charges related to its makeover from personal computer maker to consumer electronics company.

Gateway posted a loss of $111.3 million, or 35 cents a share, compared with $69.2 million, or 22 cents a share, for the same period a year earlier. The latest period, which marked Gateway's 12th loss in 13 quarters, included charges of $41 million for restructuring and a tax provision of $24 million.

Excluding those charges, Gateway posted a loss of 15 cents a share, matching the estimate of analysts polled by Thomson First Call and at the low end of the company's projected range.

Revenue declined 17 percent to $875.1 million from $1.06 billion despite a raft of new flat-panel televisions, cameras, music players and other gadgets that the company hoped would validate its gamble to become a consumer electronics company.

Gateway blamed disappointing holiday sales on shortages of certain products _ including 42- and 50-inch plasma TVs and two PC models _ a shrinking chain of stores and competitive pricing for low-end PCs. The company sold 526,000 PCs during the quarter, down 27 percent from last year.

"Revenue is something we want to continue working on," Gateway chief financial officer Rod Sherwood said in an interview. "We've got more work to do. We need to get to profitability as quickly as possible."

Gateway, which is based in the San Diego suburb of Poway, declined to predict when it would turn profitable or estimate results for the first quarter.

Ted Waitt, chairman and chief executive, said he was considering how to respond to Gateway's declining share of PC sales but gave no specifics. The company's share of the PC market in the United States slipped to 3.4 percent in the fourth quarter from 5.5 percent a year earlier, according to IDC, a Framingham, Mass., research firm.

"We are looking at that very closely," Waitt said in a conference call with analysts. "How do you get that business growing? How do you get that business profitable?"

PCs accounted for 69 percent of sales, down from 82 percent a year earlier, but Gateway is encountering more competitors as it shifts to consumer electronics, including longtime PC rivals Dell Inc. and Hewlett-Packard Co.

Waitt said Gateway has no plans to exit the PC business.

"They're in an incredibly tough situation," said Barry Jaruzelski, lead partner in Booz Allen Hamilton's global technology and electronics practice. "They were starting from ground zero in consumer electronics but it's not happening fast enough. That area is now in the gunsights of all their major competitors."

Gateway ended the quarter with $1.09 billion in cash.

Gateway shares were up 4 cents, or 1 percent, to $4.09 at the close of trading on the New York Stock Exchange, before the results were released. They gained another 6 cents in extended trading.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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