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Bear Stearns Upgrades Gateway to 'Peer Perform'


Bear Stearns upgraded Gateway (GTW) to peer perform from underperform.

Analyst Andrew Neff says the decision addresses a major drag on the PC maker's profitability. He notes while it's hard to assess the company's appropriate valuation given the lack of information on Gateway's financial profile, he thinks the stock may be more event-driven in the near term.

Neff says Gateway didn't disclose the revenue, cost, and profit implications of the move, and didn't reveal the impact on its balance sheet. He sees cash outlays for severance and lease obligation payments. Neff thinks the move could get Gateway closer to its target of sustained profits in 2005. He notes proforma valuation still doesn't appear compelling, and fair value looks to be around $3.80 to $5.70.


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