Below, there are two articles from today's Bloomberg. In the second of the articles below, an analyst with Lehman Brothers says: "It is not a disaster. It could have been a lot worse." Also of importance is the statement, which is also in the second article below, from the founder and CEO of Gateway: "We don't have to be a global business to succeed. We know we can succeed in the U.S." Interesting, isn't it? A few days ago in Bloomberg, another analyst from an investment shop, which I don't recall, referred to the ongoing Argentinian crisis as "the slowest train wreck in history". As they say, get your news from the capitalists. But if you do that, you get very angry. Sabri Oncu ++++++++++ 08/28 16:27 U.S. Economy: Consumer Confidence Declined in August (Update2) By Brendan Murray Washington, Aug. 28 (Bloomberg) -- A gauge of U.S. consumer confidence unexpectedly fell in August to the lowest level in four months, a sign the economy may struggle to rebound after a yearlong period of the weakest growth since the last recession. The Conference Board's consumer confidence index dropped to 114.3 this month from 116.3 in July. August's level was the lowest since 109.9 in April and reflected a decline in optimism about the current state of the economy. A measure of the outlook for six months from now rose. Job cuts at companies such as Deere & Co. and Hughes Electronics Corp. are weighing on consumers' attitudes. In coming months, that may restrain consumer spending, which accounts for two-thirds of the economy. ``The consumer is the last finger hanging on the edge of the cliff, and if we lose him,'' the economy may slip into recession, said Mitch Stapley, who helps manage $4 billion at Fifth Third Investment Advisors in Grand Rapids, Michigan. Stocks fell on investor concerns that corporate profits will suffer if consumers cut back, while Treasury securities rose on expectations that Federal Reserve policy makers will reduce the overnight bank lending rate an eighth time this year. Central bankers have reduced the benchmark rate by 3 percentage points to 3.5 percent, the lowest since April 1994, to shore up a sputtering economy. While that's helped bring down borrowing costs for businesses and consumers, it hasn't kept companies from trimming payrolls. Job losses are a major concern of Kennis Young, a 40-year-old sales representative from College Park, Georgia. ``I'm not going to go out on a limb in this economic environment,'' he said. Katie McGowan, a 32-year-old Chicago saleswoman, said the economy is in bad shape and she knows people who have lost their jobs this year. ``Since nobody is immune, it just seems like a silly time to be making selfish financial decisions,'' she said. Slow Second Quarter The economy grew in the second quarter at a 0.7 percent annual rate, the slowest in eight years. The quarter was the fourth in a row with growth at less than 2 percent, which last happened during the 1990-1991 recession. Central bankers next meet Oct. 2 and the median of 53 analysts in a Bloomberg survey expects officials to reduce the target rate to 3.25 percent. The government's 10-year Treasury note rose 5/8 point, pushing down its yield 8 basis points to 4.84 percent. The Dow Jones Industrial Average declined 160 points, or 1.5 percent, to close at 10222.03. The Nasdaq Composite Index dropped 47 points, or 2.5 percent, to close at 1864.98. The component of the confidence index that tracks consumers' present situation fell to 145.8 in August, the lowest level since April 1997, from 151.3. A gauge of consumer expectations for the next six months rose to 93.3 from 92.9. While, the U.S. Treasury is more than halfway through mailing to taxpayers advance refunds of as much as $600 per household, that hasn't done much to shore up confidence. As of Aug. 24, the Treasury had sent out about 49 million checks valued at almost $21 billion, giving consumers a fresh injection of cash. Reason to Spend While that may give consumers with reason to keep spending, joblessness is cause for concern. New rounds of job-cut announcements at companies such as Deere, the biggest maker of farm equipment, are restraining optimism. Yesterday, Deere announced it would seek a buyer for its Homelite consumer-brand lawn-care business. Deere also plans to reorganize its construction and forestry division, cutting its payroll by about 2,000 jobs. Hughes Electronics, owner of the DirectTV satellite broadcasting service, said last week it plans to reduce its U.S. workforce by as much as 10 percent to cut costs as the economy slows. Hughes, a unit of General Motors Corp., employs about 7,900 workers. ``It's a really sluggish economy and we're heavily into consumer businesses,'' said Richard Dore, a spokesman for the company. The economy lost 259,000 jobs in the last four months and manufacturing employment hasn't increased in the past year, Labor Department statistics showed. At 4.5 percent in July, the unemployment rate is the highest in 2 1/2 years. The percentage of respondents who saw jobs as hard to get rose to 15.9 percent, the highest since 16.4 percent in January 1998, from 13.9 percent in July. The share expecting more jobs to become available rose to 16 percent from 15 percent in July. Also, stocks have fallen. The Nasdaq Composite Index is down 23 percent this year, while the Dow Jones Industrial Average has declined 5 percent. The share of consumers planning to buy a home held at 3.8 percent. The percentage planning to buy a automobile fell to 7.8 from 9.4 percent. And the share planning to buy a major appliance held at 31.3 percent. ++++++ 08/28 19:52 Gateway to Fire 5,000 and Exit Asia, Possibly Europe (Update4) By Peter J. Brennan San Diego, Aug. 28 (Bloomberg) -- Gateway Inc., the second- largest direct seller of personal computers, plans to fire about 5,000 employees, or 25 percent of its workforce, as part of a plan to revive profit by halting business in Asia and possibly Europe. The company's shares rose as much as 9.3 percent. Gateway will take $475 million in third-quarter charges and forecast a loss for the period. The San Diego-based company expects to be profitable before taxes in the fourth quarter. The company, which now has 20,000 workers, said the plan will save $300 million a year. The PC maker has reported three straight quarterly losses as demand slumped and Dell Computer Corp., Gateway's biggest rival, cut prices. Gateway has said it would have been profitable in the second quarter without its business outside the U.S. The company will close a Salt Lake City plant plus all company-owned operations in Malaysia, Singapore, Japan, Australia and New Zealand and will disclose plans for Europe within 30 days. ``The opportunities are here in the U.S.,'' Ted Waitt, Gateway's founder and chief executive, said in an interview. ``We don't have to be a global business to succeed. We know we can succeed in the U.S.'' Waitt said ``there's always a chance'' of keeping Gateway's business open in Europe. ``You have to look at the reality of the situation,'' he said. ``It's difficult to execute our strategy.'' Gateway shares rose as high as $9.40 in after-hours trading following the announcement. They rose 10 cents to $8.60 in regular trading before the release. The stock has fallen 87 percent in the past year. $1 Billion in Cash The company expects to have $1 billion in cash and marketable securities by the end of the year. For the second quarter ended June 30, Gateway reported $1.03 billion in cash and marketable securities. Standard & Poor's Corp. last week lowered Gateway's credit ratings to junk status, BB, from BBB-. The shares fell 12 percent the following day. ``Liquidity is not a problem,'' said Dan T. Niles, an analyst with Lehman Brothers who owns no shares in Gateway. ``The market reacted negatively for no apparent reason.'' Chief Financial Officer Joe Burke said Gateway doesn't have much debt and said Moody's has kept it at an investment-grade rating. Gateway said that excluding charges, it expects to be ``marginally profitable'' in the second half of this year. Analysts predicted a loss of 1 cent a share in the third quarter and a profit of 3 cents in the fourth quarter, according to Thomson Financial/First Call. ``It's not a disaster,'' Niles said. ``It could have been a lot worse. It will be a couple of quarters before we get a sense of the operations.'' Stores to Close Besides a plant and European headquarters in Ireland, Gateway has 18 retail stores in Europe. Its 36 stores in Asia and a plant in Malaysia will be closed. Gateway last year had sales of $1.36 billion in Asian and European markets. Outside the U.S., Gateway didn't have adequate distribution channels, its brand wasn't well-known and it was difficult to work with foreign partners, Waitt said. Waitt, 38, returned as Gateway's CEO in January after a year's absence. He fired his hand-picked successor, Jeff Weitzen, and six other executives after sales and profit began to slide. The firings announced today include eliminating 15 percent of Gateway's U.S. workforce, or 2,625 employees. Gateway said it will close call centers in Hampton, Virginia; Vermillion, South Dakota; Lake Forest, California; and Salt Lake City. The company will keep open call centers in Sioux Falls and North Sioux City, South Dakota; Kansas City, Missouri; Rio Rancho, New Mexico; and Colorado Springs, Colorado. There won't be any firings in Gateway plants in North Sioux City, South Dakota, Waitt said. Realignment Gateway said it's realigning into six business lines. Besides PCs, they will include communications, applications, learning, financing and services. Gateway said it will begin reporting revenue and gross profit for each in the fourth quarter. Gateway has offered those services for more than a year as part of its strategy, called ``Beyond the Box,'' to sell products with higher margins than PCs. ``They've always been focused on those six areas,'' Niles said. ``It isn't new stuff.'' The new model will enable the company eventually to have a 7 percent operating margin, Waitt said on a conference call. ``The question is when,'' he said. Gateway averaged a 6.1 percent operating margin in the five years prior to 2001. CFO Burke said the company is aiming for 7 percent by the second half of next year. The non-PC lines have revenue of about $120 billion and PCs add another $100 billion, Waitt said. ``We're going after a much bigger pie than we've gone after before,'' said Waitt.
