updated 10/28/2004 4:58:27 PM ET 2004-10-28T20:58:27

Computer manufacturer Gateway Inc. said Thursday that third-quarter losses narrowed to $59 million, or 16 cents per share, from $139 million, or 43 cents per share, a year ago. Excluding about $63 million in restructuring, transformation and integration costs, the company posted a profit of $4 million, or 1 cent per share, in the latest quarter.

Analysts surveyed by Thomson First Call were looking for the company to report a loss of 7 cents per share on sales of $936.2 million in the latest period.

Revenue increased to $915 million from $883 million a year earlier. The company sold 931,000 PC units in the third quarter, up 67 percent year-over-year, due largely to the merger with eMachines in March 2004.

Total CE and non-PC revenue was down 23 percent year-over-year due to lower CE product sales associated with the elimination of company-owned retail stores in April. CE and non-PC sales represented 20 percent of total revenue in the latest quarter, down from 27 percent a year earlier.

Looking ahead, Gateway is forecasting fourth-quarter revenue of $975 million to $1.025 billion, and said it expects sales mix shifts associated with increases in the retail segment and a seasonal decline in its professional segment to reduce gross margins by about 1 point sequentially.

As a result, Gateway expects fourth-quarter earnings per share before restructuring, transformation and integration costs of 1 cent to 2 cents. Analysts are forecasting breakeven results on sales of $1.08 billion.

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