:The Standard: Gateway Should Stick to Selling Computers; eSoft, Other Investments, in Trouble
The Standard: Gateway Should Stick to Selling Computers; eSoft, Other Investments, in Trouble Dec 29, 2000, 17 :12 UTC (0 Talkback[s]) (2456 reads) (Other stories by Cory Johnson) (As seen on LinuxInsider.com)
"An extensive investigation of Gateway's press releases, internal documents and filings with the Securities and Exchange Commission reveals that the company is sitting on a pile of dwindling "other assets," including investments in struggling dot-coms, sputtering retail partners and a few companies that might not survive the winter."
"Among the most troubled of those investments is the millions Gateway has sunk into eSoft (ESFT) , a move which seemed like a good idea on April 26, when Gateway agreed to put $12.5 million into the tiny Colorado-based Linux company with just $9 million in annual revenues. Gateway bought 640,796 shares at $19.51 apiece and inked an arrangement to buy another 640,796 shares at the same price. But almost immediately, things started to go bad at eSoft: Sequential revenues fell by 16.5 percent in the same quarter Gateway made its investment, and another 53 percent fell the following quarter. By August, eSoft shares were down to $7.50."
"Despite its contractual obligation, Gateway refused to follow good money with bad money and balked at paying $19.51 for another 640,796 shares. But eSoft insisted, issuing a press release with a demand for the other $12.5 million. The two companies finally settled the deal behind closed doors, with Gateway forking over the $12.5 million as a loan, repayable over four years, with stock priced between $11 and $19.50. ESoft was desperate for the money and had to accept the terms."
