Gateway has joined a battery of computer companies releasing lower-than-expected earnings.

Apple, Microsoft, Compaq and Intel have all issued profit warnings in recent months.

Gateway announced yesterday that it had missed targets that it had lowered last year. The world's second-biggest seller of personal computers also warned of lower first-quarter sales, and said it would cut some 10 per cent of staff, a loss of 3,000 jobs.

Share drop Gateway shares fell to $20 in after-hours trade, down from a close of $22.90 on the New York Stock Exchange.

The company earned $37.6 million in its fourth quarter, compared with $126 million in the same quarter the previous year.

Another company to join the doldrums is Hewlett Packard who also warned that its earnings would fall short of Wall Street expectations, citing a sudden drop in economic strength and customer demand.

Price cuts Gateway blamed price-cutting and a backlog of inventory for the poor sales, a trend mirrored by many IT firms.

Apple slashed prices on selected models from its Cube, G4 and PowerBook range in early January to clear a stockpile of products, making way for new product releases at Macworld, San Francisco.

Gateway forecasts a 3 per cent increase in revenues for 2001. The company expects first-quarter revenues to decline 10 per cent.

Company officials say they expect to see a return in PC demand by the second half of the year, but until then it plans to offer lower-priced PC models.