LITTLE ROCK, Ark., March 30, 2001 (PRIMEZONE) -- Cauley Geller Bowman and Coates, LLP today announced that a securities class action is currently pending in the United States District Court for the Southern District of California on behalf of purchasers of Gateway Inc. (NYSE:GTW) ("Gateway" or the "Company") common stock between April 14, 2000 and February 28, 2001 (the "Class Period").
The complaint charges Gateway and Theodore W. Waitt, Gateway's chief executive officer and chairman, and John J. Todd, Gateway's former chief financial officer, with violations of the Securities Exchange Act of 1934. The complaint alleges that Gateway reported favorable financial results for Q1-Q3 2000 in documents filed with the Securities and Exchange Commission ("SEC"), various press releases and other public statements. These statements were materially false and misleading because defendants improperly recognized revenue and failed to write down Gateway's impaired investments and losses from loans as required by Generally Accepted Accounting Principles ("GAAP"). Defendants also issued a series of false and misleading statements concerning Gateway's business operations and prospects for Q4 2000. Plaintiff alleges that defendants knew that Gateway's business was faltering, that its Q1-Q3 2000 results were false and that during Q4 2000 its operations had stumbled badly and that this would devastate Gateway's share price, if disclosed publicly. Despite this knowledge, defendants claimed that Gateway would achieve earnings per share ("EPS") growth of almost 50% in Q4 2000 and even went so far as to claim that Gateway shares were significantly "undervalued." On November 20, 2000, defendants issued a press release over a national news wire service which proclaimed that Gateway would achieve the Q4 2000 results of $0.62 EPS that the Company had forecasted.
On November 29, 2000, defendants stunned the investing public as their scheme started to unwind. It was revealed that defendants' claims of solid Q4 2000 results and its projected results for fiscal 2000 were not as defendants claimed. Defendants then admitted that Gateway would not achieve Q4 growth of almost 50% but instead would report absolutely no growth at all and would likely report losses. Defendants' release also revealed that Gateway would take a $200 million charge for impairment in Q4 2000. The market reaction to this news was swift, as Gateway's stock price fell from $31 to less than $20 in two days, on huge volume of 23 million shares.
On February 28, 2001, Gateway conceded that its previously reported results for Q1-Q4 2000 had been overstated, and that its financial results for fiscal 2000 would be revised. The Company acknowledged that it had recorded revenues before they were earned, in violation of GAAP and SEC rules. Gateway also restated its Q1-Q4 2000 results because of certain accounting irregularities at a foreign subsidiary and because it improperly failed to account adequately for loan losses against the Company's receivables. Gateway shares continued to plunge, falling to $15-1/2 on March 1, 2001. However, prior to the ultimate disclosure of defendants' improprieties, the Complaint alleges that defendant Waitt pocketed nearly $400 million in insider trading proceeds via his sales of Gateway shares during the Class Period.
Due to defendants' GAAP violations, Gateway's earlier reported Q1-Q4 2000 financial results were materially overstated. For example, cumulative net sales, operating income and net income for the nine months ended Q3 2000 were overstated by $126 million, $44 million, and $41 million, respectively, and Gateway's fiscal 2000 net income was overstated 30%.
Had Gateway accurately reported the results of its operations during 2000, it would have received 2000 earnings growth of approximately 50% less than that claimed by defendants. And, instead of achieving the Q4 2000 net income growth of 47% promised by defendants, Gateway actually reported a loss of Q4 2000 and a decrease in net income compared to 1999 of over 40% ($428 million for 1999 versus $241 million for 2000).
Cauley Geller Bowman & Coates, LLP has substantial experience representing investors in securities fraud class action lawsuits such as this. The firm has offices in Florida, Arkansas and California, but represents shareholders from throughout the nation. If you wish to become involved in this action, discuss the action or have any questions concerning this notice or your rights or interests, you are encouraged to call or e-mail the Firm or visit the Firm's Website at www.classlawyer.com.
CAULEY GELLER BOWMAN & COATES, LLP Sue Null, Charlie Gastineau or Jackie Addison P.O. Box 25438 Little Rock, AR 72221-5438 Toll Free: 1-888-551-9944 E-mail: info@classlawyer.com
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.