A class action lawsuit was filed in United States District Court for the Southern District of California, located at 880 Front Street, San Diego, CA 92101, on behalf of a class of purchasers of Gateway, Inc. (NYSE:GTW) common stock between October 13, 2000 and November 29, 2000 (the "Class Period"). The case number assigned to this matter is 00CV2468 JM (WLS). The Honorable Jeffrey T. Miller will be presiding over the case.
Defendant Gateway purports to be a direct marketer of personal computers and related products and services. The defendants include Gateway, Theodore W. Waitt (Chairman of Gateway's Board), and John J. Todd (Chief Financial Officer). The Complaint charges that defendants violated the federal securities laws by providing materially false and misleading information about the Company's financial condition, and as a result of these false and misleading statements the Company's stock traded at artificially inflated prices during the class period. Specifically, as alleged in the complaint, Gateway's reported Q3 2000 financial results on October 12, 2000 were materially false and misleading as defendants failed to write down Gateway's impaired assets in order to inflate Gateway's financial results. Subsequently, defendants issued additional allegedly false and misleading statements concerning the company 's business and its prospects for Q4 2000. The complaint charges despite defendants actual knowledge that Gateway's business was faltering, defendants claimed that Gateway would achieve EPS growth of almost 50% in Q4. On November 20, 2000, defendants issued a national press release proclaiming that Gateway would achieve the Q4 results they had previously assured investors.
On November 29, 20000, was revealed that defendants' claims of solid Q3 results and Q4 projections were not as defendants had claimed. Defendants then admitted that Gateway would not achieve Q4 growth of almost 50% but instead would report potential losses and absolutely no growth at all. Defendants' release also revealed that Gateway would take a $200 million charge for impairment in Q4. In reality, most of this write-down should have been taken in Q3. Defendants' failure to record the write down inflated Gateway's Q3 results. The markets reaction to defendants announcement was swift and devastating. Gateway's stock price declined from $31 to $19 in two days, on huge volume of 23.3 million shares.
Due to defendants' deceptive and illegal conduct, plaintiff and the other class members purchased their Gateway securities at grossly inflated prices. Had plaintiff and the other class members been aware of the truthful condition of the Company and the adverse impact that defendants' statements and omissions were having on the Company, they would not have purchased their shares, or at least not at artificially inflated prices.

Update

This case has been settled. The Claims Administrator for this litigation is Gilardi & Co. LLC. The deadline for submitting a proof of claim was September 30, 2002. If you would like to download a copy of the Notice of Pendency and Proposed Settlement of Class Action or would like further information about the settlement, please go to www.gilardi.com or call (415) 461-0410.

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