Gateway Computer Research Report

Prepared By Justin Howell

Sources: Yahoo Finance    

http://www.biz.yahoo.com

1)      Gateway Computers (GTW) is approximately 63$ per share.  EPS growth over the next few years looks solid at a rate of 28% per year.  Gateway currently has earnings per share of $1.34.  Gateway also has a solid cash flow of $3.92 per share. The numbers look good except for the fact that Gateway has a relatively high P.E. Ratio of 47.

2)      Competitors of Gateway include computer producers such as Compaq, Dell, IBM,

and Apple Computers.      

3)      As recently reported by the Wall Street Journal, Gateway is the third leading producer of  personal computers in the U.S. behind Dell and Compaq.  Gateway holds a 9.3% market share while Compaq holds a 15.3% and Dell holds a 17.1% share in the U.S.

4)      Gateway computer offers one stop shopping for computer and Internet service.  You can order Gateway computers over the phone or Internet and they will be sent directly to your home.  Gateway also offers a low monthly payment that includes the price of the computer and Internet access.

5)      Gateway tries to convince customers of how convenient it is to order their computers and receive Internet access all for a low monthly fee.

6)  I think the Personal Computer Industry as a whole has a strong future.  As people   

     continue to discover the potential of the Internet and the new possibilities  

     computers can provide the demand for personal computers will only increase.

           The only possible problem in the future is falling prices for personal computers.

7)      Gateway has proved to be a well managed company with a solid internet strategy.  Also Gateway computers can be easily purchased over the phone or Internet. Moreover, the company is growing at a solid rate of 28% per year.

8)      Some weaknesses for Gateway Computers are it�s products are not sold in retail stores which may cost them some sales.  Also the company faces very stiff competition and the threat of prices continuing to fall for personal computers.

9)      I would buy Gateway Computers for the long term but I would not buy it for the amount of time we are going to hold it. Some of the strengths of the company include high EPS growth, strong Internet strategy, and large cash flows per share. Gateway is a solid company in a fast growing market, but a lot of the possibilities for future growth are already priced in to the stock. Therefore I don�t see much upside potential for the stock price in the near term. Gateway is currently priced at only 1$ below it�s 52 week high and it has a high P.E ratio of around 47.  Another thing that worries me about the stock is a slowdown in sales as a result of Y2K.  IBM just recently reported this. 

10)    I think a strong sell trigger would be news of more computer producing companies experiencing slowdowns in sales as a result of Y2K fears.  A possible buy trigger would be if reports showed Gateway significantly increased it�s market share against rivals Compaq and Dell.