Gateway Inc
Executive Summary
Gateway, Inc. is a direct marketer of personal computers, related accessories, and information technology services. Their target market consists of individuals, families, small to medium sized businesses, government agencies, educational institutions, and large businesses in the U.S. They have “beyond-the-box” diversified products and services as well as financing programs, training, and support packages (www.hoovers.com).
Currently GTW stock sells for: $2.35 (closing price on March 25, 2003)
Recommendation: Buy (short-run)
Basis: Gateway, Inc. is indisputably in a lot of trouble. The personal computer industry is highly competitive in nature, and the depressed margins seem to be too much for Gateway to bear. My recommendation to buy the stock comes strictly from their cash per share value and expectations of the personal computer market. I believe that the PC market will begin to pick up steam near the end of this year, as many analysts expect. When this occurs, we should see some gains in GTW stock. I feel that the stock should rebound to around $1 above the cash per share value. Of course if they don’t get their costs under control, the margin based on cash per share, would begin to rapidly evaporate.
The Company
Previously, Gateway organized its business operations into four operating divisions: the consumer segment in the U.S.; the business segment in the U.S.; Europe, the Middle East and Africa (EMEA), and Asia Pacific, including Australia. As of September 30, 2001, Gateway reorganized its domestic consumer and business operations into one unit and closed its EMEA and Asia Pacific operations (www.hoovers.com).
As of January 31, 2002, Gateway was operating 277 retail stores in the U.S. and offers over the telephone ordering 18 hours a day, seven days a week. They have sold over 25 million PCs to date and maintain a database of these...
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