Novice Investing - Gateway No Way Out

Date: Monday 01st 2008f December 2008 03:43:13 PM

Gateway No Way Out - 02/15/2006

By: Novice Investing Staff

My my my, how time has passed. Gateway Inc. (GTW) has always been behind the shadow of its much larger rival, Dell Inc. (DELL). Both of them used to pioneer direct selling and change the computer business. Then, things changed. Gateway can't seem to find its niche and flounder. Meanwhile, Dell is now one of the biggest PC manufacturers in the world.

It hasn't recovered from post bubble era of 2002. In December 2002, the company has a positive net cash of $ 1.06 Billion or $ 2.84 per share. You could have bought Gateway at cash value back then. The latest balance sheet shows that Gateway merely has a $ 335 Million of positive net cash.

To be fair, Gateway tried all its might to fight. Under the leadership of Wayne Inouye, Gateway has turned a profit on the second quarter of last year after a string of 13 straight quarterly losses. For the fourth quarter of 2005, Gateway reported a $ 22.4 Milion of profit. Not bad, considering that Mr. Inouye has only been a CEO since 2004.

The story has not ended, however. On February 9th 2006, Mr. Inouye resigned from his post to pursue other interests. Funny how the word 'to pursue other interests' can be interpreted as bailing out, but it may ring true. Investors were rushing to the exit, driving Gateway stock to $ 2.49, near its 52 week low. They have reasons for that. After all, why on earth would Mr. Inouye resign when things start to turn up? Furthermore, if you own shares that goes nowhere but down for the past five years, you tend to be jumpy and head to the exit easily.






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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Dell Inc. (DELL) or any other securities.

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