America Online to invest $200 m more in Gateway

SAN DIEGO: Gateway Inc. said on Friday that America Online, a unit of AOL

Time Warner Inc. will invest $200 million in preferred shares of the computer

maker, in a deal that amends a two-year-old marketing and investment agreement

between the two companies.

The new agreement will see America Online, the nation's No. 1 Internet

service provider, invest the $200 million in Gateway Series A convertible

preferred stock. It also expands the companies' distribution and marketing

alliances.

Under terms of the agreement, America Online also will exchange the $200

million of Gateway convertible debt it current holds for a shares of a new class

of Gateway Series C convertible preferred stock.

Under their original agreement, America Online was to invest $400 million in

Gateway Series A convertible preferred stock. The final investment is scheduled

to close later this month.

"We're pleased with these arrangements as we believe they benefit

Gateway and its shareholders," said Joseph Burke, Gateway's chief financial

officer. "They will enhance Gateway's strong liquidity position and

eliminate our long-term debt while being sensitive to shareholder

dilution."

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