Over the last two years I have gravitated towards Gateway (GTW) many a time trying to figure out if it is a turnaround story or a trap. I first got interested in Gateway back in May 2004 when Gateway had just completed its acquisition of EMachines and appointed EMachines CEO Wayne Inouye as the CEO of the combined company. The stock was then trading at $4 and it looked like Inouye might just be able to turn Gateway around by getting rid of all the Gateway brick-and-mortar stores, working out better deals with suppliers from the far East and making Gateway a lean operating company like Dell (DELL). For a while it looked like the story was going to play out like everyone hoped and the stock moved up through the rest of 2004 to close at a peak of $6.92 on Dec 1st, 2004, an impressive gain of over 70%. When reality set in and Gateway continued to lose market share thanks in part to the introduction of $349 PCs by Dell, the stock began its steep descent losing almost two-thirds its value to close at $2.44 on Feb 13th, 2006.
Last week I looked at Gateway again trying to fathom whether Gateway had reached a bottom. At a Price/Sales ratio of 0.24 and forward looking P/E of 13.56, it certainly appears that way. A closer look at Gateway reveals an interesting picture.
On the positive side,
On the negative side,
The jury is still out on Gateway and I would rather stay on the sidelines than get embroiled in the turmoil at Gateway.