From Insider Score: On the same day that shares of Gateway (GTW) hit an all-time low, the PC maker's interim chief executive officer nearly doubled his stake in the company. Interim CEO Rick Snyder, who is also the chairman and president of the company, purchased 50K shares at $1.96 on May 15th, raising his stake in the company to approximately 105K shares. It was Snyder's first buy in more than three years, and only the second by any GTW insider during that same period.
The only other insider buy in the last three years came a little more than a year ago when Senior Vice President John Goldsberry purchased close to 73K shares at $3.44 from another executive in a private transaction.
Snyder originally worked at GTW between 1991 and 1997, where he served as executive vice president and later president and COO. He left the company in 1997 to found Avalon Investments, a technology-focused venture capital firm. In 2000, Snyder founded Ardesta, a venture-capital firm focusing on nanotechnology. He maintained a position on GTW's board of directors during his time away from the company, and was elected chairman last year. In February, Snyder was asked to return to GTW as the interim CEO, when Wayne Inouye resigned from the top spot unexpectedly. The company has said it expects to name a new CEO by late summer.
While Snyder is buying, other GTW insiders have been selling.
Senior Vice President Robert Davidson has sold through open market sales, exercise and sells, and planned sales about 463K shares during the past 18 months. His most recent sale was for 30K shares at $2.07 on May 10th, which reduced his stake in the company to about 520K shares. Theodore Waitt, the company's founder and top shareholder with about 81.3M shares to his name, has been slowly unwinding his 21.8% stake in the company, selling more than 22M shares in 117 open market or planned sales over the last 18 months. Most recently, Wiatt sold 100K shares at $1.93 on May 12th.
GTW has, of course, been suffering for years, as companies such as Dell (DELL) and Hewlett-Packard (HPQ) have outclassed their smaller competitor. Inouye had been tasked with turning the struggling company around, but resigned shortly after GTW reported poor Q4 2005 earnings. Inouye made a valiant effort to cut costs at the bloated PC maker, shutting down the company's retail operation and exiting the consumer electronics business, but a Business Week article from February of this year said Inouye's exit suggested that the job of fixing GTW "may be simply too big for anyone." Arik Hesseldahl's article went on to speculate that as GTW's stock price has plunged, the company has become an attractive buyout target, quoting analyst Charles Wolf of Needham & Co., who said, "My conjecture is that the board sees a sale to another company as the only way out." Possible buyers include Chinese PC maker Lenovo (LHL) and Taiwan's Acer. A leveraged buyout engineered by the former sole owner of eMachines (acquired by GTW) and the current number-two shareholder of GTW, Lap-Shun "John" Hui, has also been suggested.
In late April, GTW reported adjusted breakeven first-quarter results, disappointing analysts who expected the company to post a modest 2 cents per share profit. Litigation expenses related to an intellectual property lawsuit brought the company's loss to -$12.3M, or -3 cents per share, and wiped out an $8.63M benefit from a $150M legal settlement with Microsoft (MSFT). Revenues, however, were up about 29% year over year to $1.08B versus, handily beating the $940M consensus estimate, and PC sales grew 47% to 1.38M.
Despite the robust performance of GTW's retail unit, where sales rose 67%, GTW's Professional (sales to government, businesses, and schools) and Direct units saw their fortunes slide, and Snyder vowed to fix the problem. Regardless, the stock fell to $1.82 this morning, a new all-time low and a penny worse than yesterday's low. Since hitting an all-time high of $84.00 in November 1999, shares of GTW have lost almost 98% of their value.