Gateway Junk Ratings Are Cut Two Levels

Gateway Inc. had its junk ratings cut two levels by Moody’s Investors Service because of concern about the personal computer maker’s ability to lift sales and reduce costs enough to return to profitability soon.

The company’s senior unsecured debt was lowered to Ba3, the third-highest junk rating, from Ba1. Standard & Poor’s two weeks ago reduced Gateway’s credit rating to B-plus, the fourth-highest junk level.

Gateway shipped 645,000 PCs in the U.S. in the first quarter, a 30% drop from a year ago. Its market share fell to 5.8% from 8.3%, according to research firm Dataquest Inc., while rival Dell Computer Corp. lifted its share to 26.3%.

Gateway began its biggest-ever ad campaign this year and is redesigning its PCs with sleeker looks to help regain market share.

Debt-rating changes are “irrelevant” to the company’s strategy, Gateway spokeswoman Ashley Wood said. “We have no long- term debt and don’t intend to incur any in the near future. Our projected growth is not capital intensive.” Gateway has $1.2 billion in cash and marketable securities and an unused $300-million bank line maturing in 2004, Moody’s noted.