Lower portable prices mean Gateway faces a challenging future.

THE computer business is brutal--ask Gateway Inc. Just after the Irvine-based PC maker cut its sales and profit guidance for the year, market researcher Gartner Inc. said it expects worldwide PC revenue in 2005 to reach $202.7 billion, flat with last year.

The reason: falling prices for portable computers.

While that's been a consistent theme for desktop PCs, things haven't been as bad for portables. In fact, robust sales and stable prices have been a buoy for the sector of the business over the past couple of years.

For Gateway, the road could be tough in the short term. With rivals such as Irvine-based Toshiba America Information Systems Inc., part of Japan's Toshiba Corp., and Dell Inc. of Texas posting strong market share, Gateway has its work cut out in portables.

Gateway lowered its sales and profit guidance for the year earlier this month, citing competition and delays resolving tax issues.

The company said it now expects sales of $3.9 billion to $4 billion for the year, down from $4 billion to $4.25 billion it earlier expected. Gateway could earn $45 million for the year, down from an earlier profit expectation of about $59 million.

Chief Executive Wayne Inouye came to power after Gateway's acquisition last year of low-cost computer seller eMachines of Irvine. Inouye, a former Best Buy Co. executive, is looking to adopt eMachines' lean model at Gateway.

And while the company might have seen competition eat at its profits during the past quarter, Inouye, with his background in retail PC sales, might be able to make up for that with higher volume, edging out other store-shelf rivals.

Staff reporter Hilary Potkewitz and Orange County Business Journal reporter Andrew Simons contributed to this column. Potkewitz can be reached at [phone] ext. 226, or by e-mail at [e-mail].