Gateway the No. 2 direct seller of personal computers, yesterday posted lower fourth-quarter profits, citing supply problems and an unexpected business-sales slowdown stemming from the year 2000 problem.

Gateway, which built its success through its direct sales approach and quirky black-and-white cow image, said net earnings for the three months ended December 31st were $126 million (€125 million), or 38 cents a share, compared with $129 million, or 40 cents a share, a year earlier.

The company warned earlier this month that profits would be about 7 cents short of Wall Street's expectations.

Meanwhile, Sun Microsystems announced second-quarter net earnings of $353 million, a 30 per cent increase compared to the previous year.