UBS Piper Cuts Gateway Estimates

Gateway's restructuring plan will help the computer maker to slash costs, but cautions that the move could cut into services

UBS Piper cut estimates on Gateway (GTW ) but kept the buy rating.

Analyst Ashok Kumar says the salesforce workforce reduction is expected to cut deeper into the company's customer support division, which already ranks among the lowest in the industry. He notes Gateway also is closing down operations in Asia (7% of revenues), will imminently withdraw from Europe (5% of revenues); this should benefit Compaq.

Kumar cut the $6.7 billion calendar 2001 revenue estimate to $6.4 billion, and cut the $7 billion calendar 2002 to $6 billion. He views restructuring as more of a desperate attempt to cut expenses faster than sales, rather than a strategic alignment of business resources.

Kumar says Gateway's stock is fairly valued at current levels.