It looks like the Grinch has already stolen Christmas from high tech companies Gateway and Transmeta, which each announced a bad news in the waning days of November. PC maker Gateway warned analysts Wednesday evening that the traditionally strong holiday sales period would be weaker than expected, and the market responded Thursday by trouncing the company's stock, which was down dramatically when the market opened. And mobile chipmaker Transmeta, which offers a low-power CPU that competes with Intel's designs, announced that the first batch of PCs based on its chips is being recalled. The news also launched an assault on that company's stock, which has dropped to less than 50% of its opening day value since the Transmeta IPO in early November. Fears of a wider recall loom over the company as well. All in all, it's not the type of holiday season for which the computer industry was hoping.
Gateway minced no words in its announcement about the holiday season. "As a result of considerably weaker-than-expected consumer holiday sales of personal computers, Gateway today announced that it expects to report revenue and earnings per share for the fourth quarter ending December 31 that are significantly lower than Wall Street consensus estimates," the company said in a statement. "The company said it expects to report revenue of approximately $2.55 billion for the fourth quarter, about equal to the same period the previous year, and $500 million below previous estimates." The vast majority of Gateway's sales are to the consumer market, which suggests a few possibilities: The economic boom in the U.S. is coming to an end, or consumers are at least temporarily turning to less expensive computing devices, such as Palm and PocketPC devices, and MSN Companion-type Internet terminals.
Meanwhile, over at Transmeta, the news of a recall couldn't have come at a worse time. After finally debuting its first generation of Crusoe microprocessors, the company has seen a number of early PC maker backers, such as IBM, walk away in favor of Intel designs. And it's much ballyhooed IPO less than a month ago has generated little excitement. But with the company having to recall 300 NEC laptops based on its chip, Transmeta now faces a bigger problem: The likelihood of a bigger recall, involving its other PC maker partners, such as Sony and Fujitsu. In the meantime, NEC says that it will have to replace the motherboard in the affected systems, and Transmeta is working with the company to figure out the problem. The remaining inventory of problematic chips was returned to Transmeta before they shipped to customers, all of whom are in Japan.
And even microprocessor giant Intel hasn't been unaffected by the problems this holiday season. This week, the consumer electronics store Best Buy announced that it will not sell computers based on Intel's Pentium 4 until Intel fixes the bug that was discovered in the chip last week. Apparently, PC maker Hewlett Packard had sent a batch of PCs with the buggy chip to the retailer last week, and Best Buy has been dealing with customer service issues ever since. Not helping the matter is the news that Intel has left the responsibility for fixing the PCs up to the PC makers and retailers that sell the products. So Best Buy has simply washed its hands of the problem and vowed to not offer PCs based on the chip until the problem is fixed. And Best Buy has returned its entire inventory of P4-based PCs to Hewlett Packard so that they fix the problem. Best Buy now expects to be selling Pentium 4-based PCs again sometime in December.
So much for goodwill and cheer. Where's Jim Carrey when you need him