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Gateway, Inc., previously Gateway 2000, Inc., was an American computer company originally based in Iowa and South Dakota. Founded by Ted Waitt and Mike Hammond in 1985, the company developed, manufactured, supported, and marketed a wide range of personal computers, computer monitors, servers, and computer accessories. At its peak in the year 2000, the company employed nearly 25,000 worldwide.[1] Following a seven-year-long slump, punctuated by the acquisition of rival computer manufacturer eMachines in 2004 and massive consolidation of the company's various divisions in an attempt to curb losses and regain market share, Gateway was acquired by Taiwanese hardware and electronics corporation Acer in October 2007 for US$710 million.

Key Information

History

[edit]

1985–1990: Foundation

[edit]
Gateway 2000 logo used from 1990 to 1998
Gateway 2000 logo used from 1990 to 1998
Loading dock of Gateway's former headquarters in North Sioux City. Note the black splotch in the far-left end; the entire complex was once painted white with black splotches, in keeping with the company's corporate identity.[2]
A pizza-box form-factor desktop computer manufactured by Gateway, circa mid-1990s

Gateway was founded as the TIPC Network by Ted Waitt and Mike Hammond in September 1985. Ted Waitt was the company's principal founder; he was later joined by his older brother Norman Waitt, Jr.[3]: 38  Before founding the company, Ted Waitt lived on his family's cattle farm in Sioux City, Iowa. He had dropped out of two different colleges to work on the farm before landing a job at a computer store in Des Moines, Iowa. After nine months of experience gained on the job, Ted had the idea to start his own computer reselling company that would allow him to sell to niche customers who needed systems in between the lower- and upper-ends of the personal computer market, whose systems were either too limited in terms of speed and memory or too expensive with seldom-used higher-end features.[3]: 39 [4]: 153  Ted also found that educated salespeople could successfully sell computers to customers completely over the telephone, impressing on him the idea that he could eliminate overhead by having a robust remote salesforce and impressive catalog.[3]: 40 

Strapped for cash, however, Ted Waitt took out a $10,000 loan from his grandmother Mildred Smith and occupied the empty upper floor of his father's dilapidated cattle brokerage.[3]: 40 [5] He was joined by Mike Hammond, Ted's coworker who trained the latter to become a computer salesman at their previous job. The duo's first products were software and peripherals for Texas Instruments' Professional Computer home computer, advertised in various computer magazines. The TIPC had been discontinued in the previous year and was largely considered obsolete by 1985. TIPC Network charged their first customers with a membership fee of US$20, in order to flush the company with more start-up capital.[3]: 40 

Owing to their products' very low costs, TIPC earned up to $100,000 in sales within the first four months, beating out many of their competitors in the TIPC aftermarket segment. In early 1986, Ted's brother Norman Waitt was hired as TIPC's financial advisor in exchange for owning half of the company.[3]: 40  That year, the company began selling their own hand-assembled computers locally on an experimental basis. By the end of 1986, TIPC changed their name to Gateway 2000, Inc., and earned $1 million in revenues—the experimental complete computer systems contributing only a small amount to this figure.[3]: 36 [4]: 154 

Gateway 2000 was inspired to produce computer systems compatible with IBM's hugely successful Personal Computer in mid-1987, after Texas Instruments had announced a rebate program allowing customers to trade in their older home computer systems (including the TIPC), in order to contribute toward a $3,500 credit on Texas Instruments' PC-compatible systems. Feeling that they could offer such computers for half the cost, Gateway 2000 released a complete PC compatible system with dual 5.25-inch floppy drives, ample RAM, a color monitor, and a keyboard, for $1,995 through mail-order. The system was a success for Gateway 2000, with revenue increasing from $1.5 million in 1987 to $12 million in 1988.[3]: 42 

The company's first computer systems were assembled from parts supplied from other mail-order companies. Instead of hiring computer engineers and industrial designers to devise these products, Gateway 2000 instead relied on Ted Waitt's instincts for what customers might appreciate. According to the company, their initial customer base shopped on price alone and rarely made requests for service parts or complex technical support. Because of this, Gateway 2000 maintained a slim overhead, and they were able to price their products below competitors.[3]: 42 

In 1988, Gateway 2000 moved their headquarters from the Waitt family ranch to the 5,000-square-foot Livestock Exchange building in downtown Sioux City, for which they paid $350 a month in rent.[3]: 42  In the same year, the company launched their first major advertising campaign, taking out a full page advertisement in computer magazines for the first time to advertise the company and its products, putting particular emphasis on their low cost and the company's Midwestern United States roots. Waitt described the aim of the tagline "Computers from Iowa with a question mark. Like, who would expect computers from Iowa? You just don't expect it...And it struck a chord in a time when people were, you know, doing a lot of things different in the industry. You know, so that was the original cow ad."[citation needed] The campaign was funded with only a small portion of Gateway 2000's revenues (2.5 percent) but was very successful nonetheless, the company netting $70.6 million in sales in 1989.[4]: 154 

1990–1995: Early growth

[edit]
Gateway HandBook, subnotebook computer manufactured beginning in 1992

In January 1990, Gateway 2000 moved their headquarters from Iowa to North Sioux City, South Dakota, in order to take advantage of South Dakota's lack of income taxes.[3]: 42  The company expanded their advertising campaign that year, producing a number of humorous half- and full-page spreads, featuring employees of the company (including Ted Waitt) in pastoral settings, photographed by a local studio. The company extended the pastoral theme to their shipping containers, which were white with black spots, reminiscent of Holstein cows; this monochrome design scheme also contributed to low costs.[3]: 42–43  Waitt recalled that "The cow spot was actually developed by a graphic designer. I can't take a claim for that. All I can take claim for it, when I saw it on a box, I said, that is amazing... it was kind of that, no matter where Gateway went, around the world, we took the cow spots. And it was taking that, you know, Iowa values, those Midwestern values with us wherever. It was our symbol."[citation needed]

Gateway 2000 posted $275 million in revenues by the end of 1990.[3]: 36  Fearing that the company was growing too big for them to handle, the Waitts and Hammond recruited a public accounting firm and poached six executives from rival computer manufacturers to plot the company's growth. These executives in turn set up a number of divisions to promote innovation within the company, including a marketing department with five employees, a group dedicated to exploring new technologies with twenty employees, an "Action Group" of ten executives whom Ted Waitt deferred to every two weeks, and a "Road Map Group" to evaluate product development and branding choices. In addition, the company hired a media buyer to handle the company's advertising assets advertising and contacts with magazines and other mass media companies.[3]: 45 

In the summer of 1991, Gateway 2000 commissioned the construction of a 44,000-square-foot manufacturing plant down the road from its North Sioux City headquarters, expected to increase its manufacturing output by 30 percent. That year, the company also expanded their dealer channels beyond the individual buyer into fleet sales to enterprises. Gateway 2000 offered such corporate clients training programs, troubleshooting literature, and more rigorous customer service. While still a private company at this point, Gateway 2000 elected to release financial results quarterly via press releases in order to project an image of legitimacy among corporate buyers.[3]: 45  By 1991's end, Gateway 2000 posted $626 million in sales.[6]: 14 

Despite the added research and development divisions in 1991, the company admitted to falling behind their competitors in terms of innovation. In an attempt to catch up, Gateway 2000 began segmenting its marketing to appeal to customers with specific needs beyond value and price.[4]: 155  For example, the company began offering their desktop computers with the AnyKey, a 124-key keyboard with advanced macro programming for power users and programmers.[7] In 1992, they released the HandBook, a lightweight subnotebook aimed at the executive market. At the end of 1992, the company added 200 people to their support and sales departments, increasing the number of total employees in the company to 1,700.[4]: 155  By 1992's end, Gateway 2000 reported $1.1 billion in sales.[8] The company had managed to avoid losses during a fierce price war ushered in by Compaq over the summer of 1992,[9] becoming the leading mail-order computer business in the United States.[4]: 155 

Gateway 2000 reported their first drop in revenue in the second quarter of 1993, which they attributed to quality control problems reported during the final quarter of 1992 and a stagnant roster of products.[10] To remediate the latter, the company released a notebook with a passive-matrix color LCD and a newer subnotebook. In order to stave off the rise of competitors Dell and IBM in the mail-order market, Gateway 2000 began pursuing markets outside the United States and planned to ramp up their corporate sales by the end of 1993. In service of the latter goal, Gateway 2000 launched a division dedicated to handing major accounts, poaching an executive from IBM to head this division. Gateway's technical support staff doubled its headcount to just over 400; Gateway 2000 assigned each of their large corporate customers their own dedicated technical support associate.[4]: 155  In October, Gateway 2000 established a European subsidiary in Dublin, Ireland, which staffed a full roster of departments, including manufacturing, sales, marketing, and technical support.[11]

In order to offset the higher-than-expected cost of their corporate sales boost and expansion into Europe, Gateway 2000 announced their plans to go public in October 1993.[12] With their initial public offering the following December, the company raised $163.5 million through selling 10.9 million shares.[13] These shares represented a 15 percent stake in the company; Waitt retained ownership of the other 85 percent of Gateway 2000.[6]: 14  Along with financing the aforementioned two initiatives, this infusion of capital also allowed Gateway 2000 to expand its product roster to include networking hardware such as fax modems, peripherals such as printers, and various software products.[4]: 154  By the end of 1994, the company employed 5,000 and posted $2.7 billion in revenue.[14]

1995–2000: Major expansions

[edit]
Left: Gateway 2000 P5-120, 120-MHz Pentium-equipped tower computer manufactured by Gateway in around 1996; Right: Gateway Solo 2200, 166-MHz Pentium notebook from the same year

In September 1995, Gateway 2000 commissioned the construction of a manufacturing facility in Hampton, Virginia, worth between $18 million to $20 million and an overseas manufacturing plant in Malaysia to serve computer buyers in East Asia.[15]: 1 [16] In August 1995, the company purchased an 80-percent stake in the Australian Osborne retailer,[17] and in the following November, Gateway 2000 established their first website on their first Internet domain, gw2k.com.[18] By the end of the year, Gateway 2000 posted revenues of $3.7 billion.[19]

Gateway Destination 2000, Pentium II variant from 1998

In 1996, Gateway 2000 introduced the Destination 2000, an early home theater PC that used a large-screen CRT television as its monitor. It was intended for consuming home media content and multimedia software and came with a built-in modem for Internet connectivity. The Destination 2000 sold poorly, and after several months Gateway began offering these systems at retail outlets such as CompUSA at deep discounts.[4]: 156 

In March 1997, the company opened up a number of brick-and-mortar retail locations, called Gateway 2000 Country Stores, in various suburbs across the United States. Gateway Country Stores did not stock any of the company's products but had a number on display to allow customers hands-on experience with Gateway 2000 computer systems; customers had to order by phone or through the company's new website. Their first location was in Tampa, Florida.[20] By 1999, Gateway 2000 had opened up over 140 Country Stores.[4]: 156 

In April 1997, Compaq Computer Corporation was in talks to purchase Gateway 2000 to bolster the former's presence in the mail order market.[21]: 4  The deal was nearly signed, with Gateway set to receive $7 billion, before Waitt vetoed the acquisition that summer.[22] Gateway 2000 themselves acquired two companies in the year, the first being the Amiga Technologies subsidiary of Escom AG, a German company that had filed for bankruptcy in the preceding year. Announced in March 1997,[23] the deal was finalized in the following May, with Amiga International, Inc., incorporated as a subsidiary of Gateway 2000 in South Dakota.[24] Gateway 2000 paid Escom $13 million for the patents to Amiga technologies, the majority of which centered on multimedia capability.[25] In June 1997, Gateway 2000 acquired Advanced Logic Research, Inc., a maker of high-end workstations and servers, in a stock swap valuated at $194 million.[26]

In late 1997, Gateway 2000 began phasing out the use of cows in their branding in an attempt to project a more mature image to their corporate clients.[27] Simultaneously, the company formed Gateway Major Accounts, a subsidiary focused on fleet sales to enterprise clients.[4]: 156  By 1997's end, the company posted $6.29 billion in revenue and $1 billion in profit.[28]

In 1998, the company began dropping the "2000" from their moniker, as the coming turn of the millennium meant that "Gateway 2000" would soon sound antiquated.[29] The company was formally reincorporated as Gateway, Inc., in May 1999.[30] Also in 1998, Gateway moved their headquarters from South Dakota to La Jolla, San Diego, California—both because Ted Waitt himself wanted to move to California and also to move the company closer to top executive talent at the center of the technology industry.[4]: 156 [31] The move was a success in this right, with a new slate of executives hired in 1998, including Jeff Weitzen, a veteran of the AT&T Corporation who was named president and chief operating officer of Gateway.[31]

The new management planned to refocus the company's bottom line toward providing information technology services and software, enterprise finance and training, and consumer hardware peripherals, as the market for selling only computer systems had been seeing continually shrinking profit margins.[4]: 156 [31] As part of this expansion, Gateway also established their own Internet service provider, Gateway.net, offered exclusively to their customers and competing with the likes of America Online (AOL). Beginning in June 1998, Gateway bundled Netscape Navigator web browser on its systems preinstalled with Microsoft's Windows 95 and 98, the latter of which Microsoft themselves bundled with their own web browser, Internet Explorer.[32]

Gateway.net saw slow adoption rates—there were only 200,000 subscribers in early 1999—and was outage-prone. In February 1999, Gateway switched from Web America Networks to MCI WorldCom as their Internet backbone.[33] Also in that month, Gateway began offering one year of free Gateway.net service to those who purchased a Gateway PC worth $1,000 or more.[34] The base of subscribers increased threefold to 600,000 by October 1999 as a result of the promotion. In October 1999, Gateway switched their Internet backbone again to AOL, the latter taking over all operations of Gateway.net in exchange for a $800 million stake in Gateway.[35]

Ted Waitt resigned from his position as CEO of Gateway in December 1999. Weitzen was named president and CEO, while Waitt retained chairman of the board.[36] One of Weitzen's first acts as CEO was approving the divestiture of Gateway's Amiga International division, selling the corresponding Amiga patents and trademark rights to Amino Development Corporation, who later renamed themselves Amiga, Inc.[37]

2000–2004: Faltering and consumer electronics

[edit]
Gateway logo used from 2002 to 2004
Gateway logo used from 2002 to 2004

Coinciding with the Dot-com bubble burst, a global downturn in the personal computer industry at the beginning of 2000 had a major negative impact on Gateway, whose dependence on the worst-hit markets of small business and home office buyers incurred significant quarterly losses. Rival PC maker Dell Computer Corporation had fared better since their main business was centered around corporate clients rather than consumers.[citation needed]

Weitzen laid off many senior managers within the company and broke tradition by selling Gateway's conventional personal computers through retailers such as OfficeMax and QVC.[4]: 157  A price war instituted by rival Dell Computer Corporation led to Gateway posting a fourth-quarter loss of $94.3 million in 2000.[4]: 157 [38] Gateway's net profits fell to between $241.5 million and $316 million, while its stock dropped to $18 per share, down from $72 per share.[4]: 157 

PC market share as of July 30, 2001[39]
Ranking

(in U.S.)

Company % U.S. % World
1 Dell 24.0 13.4
2 Compaq 12.7 12.1
3 Hewlett-Packard 9.4 6.9
4 Gateway 7.6 3.2
5 IBM 6.1 7.2
6 Apple 4.8 4.1

In the beginning of 2001, Ted Waitt ousted Weitzen and several other executives from the board of directors, reassuming the role of CEO and instigating an extensive restructuring of the company. Waitt shifted the company's bottom line away from service and software back to the sale of PCs to consumers and businesses, rehiring a number of executives that had been lost to the executive shuffle of late 1998.[40] Prices of the company's computers were massively lowered to make them competitive with offerings from Hewlett-Packard and Dell,[4]: 157  while other products, such as the Touch Pad—an Internet appliance that was the result of a joint venture with AOL—were discontinued due to poor sales.[41] Gateway's employee base was also cut nearly in half, from 24,600 to 14,000, as part of massive consolidation of the company's manufacturing plants, call centers, and Country Stores outlets. The manufacturing facilities in Malaysia, Ireland, and Lake Forest, California, were all shuttered; meanwhile most of the company's overseas subsidiaries were closed to limit the company's business to mainly within the United States. Additionally in 2001, the company moved to Poway, California. By the end of 2001, the company reported a net loss of $1.03 billion, while revenue fell to $5.94 billion.[4]: 157 

Gateway's sales dropped in 2002 to $4.17 billion, with the number of personal computer system units falling from 3.4 million to 2.75 million.[42] Gateway's American market share meanwhile shrunk from 9.3 percent in 1999 to 6.1 percent in 2002.[43] In the beginning of the year, the company laid off 2,250 employees after they had closed 19 Country Stores, a pair of technical support call centers, an Internet sales office, and a research and development laboratory.[4]: 157 [44] Gateway reported a net loss of $297.7 million for 2002.[45] In the beginning of 2003, Gateway instituted another restructuring, closing 76 of its 268 Gateway Country stores and laying off 1,900 more employees in the process.[42]

In 2003, Gateway began pivoting toward the sale of consumer electronics, introducing 118 new products across 22 categories.[4]: 157 [46] These products included digital cameras,[47] flat-panel television sets,[48] MP3 players, standalone DVD players,[49] home theater PCs with built-in DVRs, and PDAs.[50] The company's remaining 192 Gateway Country stores were renovated to accentuate these consumer electronics.[51] Gateway meanwhile attempted to increase its enterprise sales by offering more general-purpose servers and network-attached storage devices.[52][53] In late 2003, the company shut down its Hampton facility, and restricted the output of the assembly and refurbishing lines of their North Sioux City and Sioux Falls facilities.[54] Manufacturing was moved largely overseas to Taiwan, with OEMs there manufacturing and assembling the parts for Gateway's notebooks and desktops.[4]: 157  By 2003's end, Gateway let go of 1,800 more employees and were down to just 6,900 on their payroll.[54]

Also in late 2003, the U.S. Securities and Exchange Commission filed fraud charges against three former Gateway executives: former CEO Jeff Weitzen, former chief financial officer John Todd, and former controller Robert Manza. The lawsuit alleged that the executives engaged in securities violations and misled investors about the health of the company.[55] Weitzen was cleared of securities fraud in 2006; however, Todd and Manza were found liable for inflating revenue in a jury trial which concluded in March 2007.[56]

2004–2007: eMachines acquisition and consolidation

[edit]

In January 2004, Gateway announced that it had signed an agreement to buy computer manufacturer eMachines of Irvine, California, for $30 million in cash and 50 million shares of stock in Gateway.[57] eMachines was founded six years earlier as a joint venture between TriGem, Korea Data Systems, and Sotec;[58] by 2003, it had raked in $1.1 billion in sales and became the third-largest seller of personal computers in the United States while only employing 140 people total in its corporate offices.[59]

By the time the acquisition was finalized in March, eMachines' payout increased to nearly $300 million, and as a result of the acquisition, Gateway reclaimed the number three spot among American PC manufacturers and the eighth largest PC manufacturer globally.[60] The president and CEO of eMachines, Wayne Inouye, replaced Tedd Waitt as CEO, the latter remaining chairman.[61] A month later, the company announced that it would relocate to Orange County, California (where eMachines had been located); that it would shutter the remaining Gateway Country Stores—laying off 2,500 employees in the process; and that it would begin selling personal computers through third-party retailers, as eMachines had done in the past.[62] Gateway reduced another 1,000 jobs from their manufacturing and technical support facilities in Iowa and South Dakota by the end of the year. By this point, the company only employed 4,000.[63]

Inouye left Gateway in February 2006, by which point the company employed roughly 1,800—down from 7,500 at the start of his tenure.[64] In fall 2006, Gateway briefly revitalized its United States manufacturing presence with the opening of the Gateway Configuration Center in Nashville, Tennessee. It employed over 300 people in that location to assemble build-to-order desktops, laptops, and servers.[65]

2007–present: Purchase by Acer

[edit]
Gateway laptop at a Walmart in 2022

In August 2007, Acer Inc. of Taiwan announced the acquisition of Gateway, Inc., for a US$710 million tender offer.[66] The acquisition was finalized in October 2007.[67] In the interim, MPC Corporation announced that it had signed a deal to acquire Gateway's Professional Services Unit—which manufactured and designed the company's servers, network-attached storage devices, and workstations—for approximately $90 million.[68] This MPC deal was also finalized in October 2007.[69]

Following the acquisition, Acer used both Gateway and eMachines as sub-brands for several years. Many of Acer's most popular lines of personal computers, including netbooks, were rebadged as Gateway machines for midrange consumers, while the eMachines line was kept for budget consumers. In 2013, the company discontinued the eMachines brand, citing the proliferation of tablet computers and 2-in-1 laptops among the low‑end computer market.[70][71] They continued selling computers under the Gateway and Packard Bell brands — the latter being one of Gateway's former rival computer manufacturers, until it became a sister trademark after Acer acquired it in 2008.[72] Soon afterward, however, the Gateway brand was also discontinued.[73]

In September 2020, Acer revived the Gateway branding on laptops and tablets sold exclusively through Walmart. Acer commissioned Bmorn Technology, a Shenzhen-based technology company, to manufacture and sell these Gateway branded laptops. The new line of laptops is a rebadging of Walmart's existing EVOO-branded laptops. The laptops' sound systems are tuned in partnership with THX.[73][74]

References

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Gateway, Inc.

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Gateway, Inc., formerly known as Gateway 2000, was an American company founded on September 5, 1985, by and Mike Hammond in . The company pioneered a sales model via and telephone, bypassing traditional retail channels to offer customized PCs at competitive prices. Renowned for its distinctive branding, Gateway shipped products in black-and-white Holstein cow-spotted boxes, a nod to the founders' rural roots and the farming background of Waitt's family. During the , Gateway experienced explosive growth, becoming one of the world's leading PC manufacturers through aggressive expansion and innovation in consumer-oriented hardware. The company went in and rebranded from Gateway 2000 to Gateway, Inc. in to modernize its image ahead of the new millennium. By 1999, Gateway achieved peak annual revenue of $9.6 billion and shipped 4.68 million systems, capturing a significant share of the U.S. consumer PC market with products like the Gateway 2000 PC series and early laptops. It expanded internationally into markets such as and , while diversifying into services like through Gateway.net and retail store openings in the late to complement its direct-sales approach. However, the early 2000s brought challenges as intense competition from and eroded Gateway's market position, leading to declining revenues and losses. The company closed its retail stores in 2004 and acquired in 2004 to bolster its budget PC segment, but struggles persisted amid shifting industry dynamics toward laptops and online sales. In August 2007, announced its acquisition of Gateway for approximately $710 million, with the deal closing on October 16, 2007; this marked the end of Gateway as an independent entity. Post-acquisition, Acer integrated Gateway's operations and maintained the brand for entry-level , including a 2020 relaunch of laptops and tablets sold exclusively at , complete with the nostalgic cow-spotted packaging. As of 2025, the Gateway brand remains active under Acer, focusing on affordable computing devices in select retail channels.

Company Overview

Founding and Early Operations

Gateway, Inc., originally known as Gateway 2000, was founded on September 5, 1985, by and Mike Hammond in , under the name TIPC Network. The venture started with a modest $10,000 loan from Waitt's grandmother, leveraging Waitt's background in sales from his family's cattle business and Hammond's technical expertise. Initial operations were conducted from the Waitt family farmhouse in Sioux City, where the duo focused on mail-order sales of peripheral hardware and software targeted at owners of home computers. This low-overhead setup emphasized shipping to minimize costs, avoiding traditional retail markups and enabling competitive pricing. In 1986, the company was incorporated as Gateway 2000, Inc.—with the "2000" reflecting founder Ted Waitt's plan to work only until the year 2000—and pivoted to assembling and selling IBM-compatible personal computers, marking its entry into the burgeoning PC market. The first IBM-compatible system, introduced in , was a no-frills PC priced at $1,995, bundling a color monitor, two drives, expanded memory, and a keyboard with function keys—features that undercut competitors while providing essential functionality. Customers were required to pay a $20 membership for catalog access, further streamlining the direct-sales model. By , rapid growth necessitated a move from the farmhouse to a 5,000-square-foot space in Sioux City's historic Exchange building. In January 1990, Gateway relocated its headquarters to North Sioux City, , across the state line, to expand facilities and capitalize on 's favorable tax and business regulations. This move supported increased production capacity as the company prepared for broader .

Business Model and Headquarters

Gateway, Inc. pioneered a direct-mail and telephone sales model in 1987, which enabled the company to bypass retail intermediaries, thereby cutting distribution costs and passing savings to customers through competitively priced IBM-compatible personal computers. This approach relied on advertisements in national magazines and a toll-free hotline for orders, allowing Gateway to reach consumers directly while maintaining control over pricing and inventory. By avoiding retail markups, the model emphasized high-volume sales of standardized yet customizable systems targeted at value-conscious buyers seeking affordable computing options. Central to this strategy was the provision of customization options, where customers could select components like RAM capacity and hard drive sizes to tailor systems to their needs, with orders assembled on demand to minimize excess stock. Gateway committed to rapid fulfillment and customer support via a dedicated , which supported and repeat business in a competitive market. The financial structure focused on low margins per unit, offset by substantial sales volumes, positioning Gateway as a disruptor against higher-priced retail competitors during the late and . Gateway's operational infrastructure evolved from humble beginnings in an Iowa farmhouse, where early assembly occurred amid farm operations, to a more structured setup in Sioux City, Iowa, by 1988. By 1989, the company relocated its headquarters to Sergeant Bluff, Iowa, and subsequently developed a large campus in North Sioux City, , just across the state line, spanning a 77-acre site with facilities built in multiple phases from 1989 to 1997. This campus included extensive office, manufacturing, and warehouse spaces totaling over 750,000 square feet, supporting scaled operations. To enhance efficiency, Gateway pursued through in-house for PC assembly and proprietary networks, including Gateway Distribution Centers that handled order processing, component sourcing, and nationwide shipping. These centers enabled just-in-time production and quick delivery, aligning with the direct-sales ethos by reducing reliance on external suppliers and streamlining the for customized orders.

Historical Development

1985–1991: Inception and Initial Growth

Gateway, Inc. was founded on September 5, 1985, by Ted Waitt and Mike Hammond as the TIPC Network in a cattle barn on Waitt's family farm near Sioux City, Iowa, initially focusing on selling add-on components for TRS-80 computers through mail order. In 1986, the company was incorporated as Gateway 2000, Inc., reflecting its ambition to offer complete personal computer systems, and began distributing its first product catalogs to prospective customers to promote direct sales. This shift marked the inception of its direct-to-consumer model, which emphasized customization and competitive pricing without retail intermediaries. The company's early growth was fueled by word-of-mouth recommendations and targeted advertisements in personal computer magazines such as Computer Shopper, leading to rapid revenue increases from $1.5 million in 1987 to $12 million in 1988, $70.6 million in 1989, and $275 million in 1990. In 1989, Gateway introduced the Gateway 2000 Color PC, an early system equipped with VGA graphics capabilities that supported color displays, enhancing its appeal to home and users seeking advanced visual performance. These milestones established Gateway's foothold in the regional market, particularly in the Midwest, through efficient assembly operations and a focus on value-driven products. Despite its success, Gateway faced early challenges with due to the capital-intensive nature of component and assembly in a small-scale operation. These issues were addressed by strategically sourcing parts from cost-effective suppliers in , which helped lower expenses and improve margins without compromising quality. By 1991, the workforce had expanded to around 1,300 employees, supported by a company culture that emphasized non-commission-based to encourage unbiased advice and long-term satisfaction. This approach contributed to the direct sales model's early effectiveness in building customer loyalty during the startup phase.

1991–1996: National Expansion and Direct Sales Model

In 1991, Gateway, Inc. (then known as Gateway 2000) shifted toward national expansion by launching its first major advertising campaign, featuring full-page ads in publications like and initial television spots aimed at broadening its customer base beyond the Midwest. These efforts highlighted the company's value-oriented approach, emphasizing bundled components and competitive pricing to attract a wider audience during the burgeoning PC market. The strategy paid off rapidly, with annual sales surpassing $1 billion by the end of , fueled by the direct sales model that allowed customization and home delivery without intermediaries. By 1994, Gateway had captured approximately 5% of the U.S. PC , establishing itself as a key player amid intense competition from established brands. To support this growth, Gateway refined its direct sales channels in by incorporating fax-based ordering alongside traditional mail and phone methods, streamlining the process for customers nationwide. The company also introduced an early online presence that year, laying the groundwork for digital sales integration. These enhancements enabled faster order processing and contributed to sustained revenue increases during the mid-1990s PC boom. In 1996, Gateway opened its first Gateway Country stores as experiential showrooms across the , where customers could view and configure systems but complete purchases through the direct model rather than on-site sales. This move complemented the core direct approach without shifting to traditional retail. To distinguish itself from rivals like , Gateway emphasized bundled peripherals—such as monitors and software—in its packages and prioritized expedited shipping, often delivering within days to underscore reliability and customer convenience.

1996–2000: IPO, Peak Market Share, and International Reach

During the late , Gateway, Inc. (then known as Gateway 2000) experienced its most significant financial growth, culminating in a peak revenue of $9.26 billion in 2000, driven by strong demand for personal computers amid the dot-com boom. The company achieved a U.S. PC of approximately 9.3 percent by the end of 1999, positioning it as the second-largest direct seller behind . This period marked Gateway's transition from a regional player to a national leader, supported by its established direct sales model that emphasized telephone and online orders with customized configurations. Gateway's stock performance reflected this zenith, reaching a high of $82.50 per share in November 1999, more than doubling from its 1997 levels following a and listing move to the . However, by early 2000, the stock began showing volatility, dropping from highs amid hints of overexpansion in retail stores and international operations, which strained and increased costs. In May 1997, the company had announced the and NYSE listing to accommodate growing investor interest, enhancing liquidity without a new . International expansion accelerated during this era, with Gateway launching operations in in 1996 through a in , , targeting direct sales in the UK, , , and other markets. By 1998, the company established offices in Asia to capitalize on emerging demand, contributing to a 157 percent jump in Asian sales in late 1996 alone. A notable move was the 1997 acquisition of Technologies' assets for about $13 million, aiming to leverage the brand's multimedia legacy for , though it was later sold in 1999. These efforts diversified revenue but highlighted challenges in adapting the U.S.-centric direct model to global markets. In 1999, Gateway introduced enhancements to its Gateway.net ISP service, launched in late 1997, by offering a year of free access bundled with PC purchases to boost subscriber numbers, which peaked at around 600,000. This initiative aimed to integrate services with hardware sales, aligning with the era's online surge, though it faced competition from larger providers like . Overall, these strategies underscored Gateway's ambition but sowed seeds of overextension as competition intensified.

2000–2004: Competitive Pressures and Diversification Attempts

The dot-com bust and a broader downturn in the personal computer industry beginning in early 2000 severely impacted Gateway, Inc., leading to a sharp decline in demand for consumer PCs. The company's net sales for fiscal year 2001 fell to approximately $5.95 billion after restatement, a significant drop from $9.26 billion in 2000, exacerbated by reduced and excess . By the end of , Gateway's stock price had plummeted to $3.14 per share, reflecting investor concerns over the company's profitability amid the economic slowdown. Intensified competition from Computer Corporation's efficient direct-sales model and Hewlett-Packard's strong retail distribution further eroded Gateway's position in the U.S. market. Gateway's share of the home desktop PC segment declined from 15% in early 2001 to 8.8% by year-end, contributing to an overall loss of roughly 6 percentage points during this period as rivals captured more volume through cost advantages and broader channel presence. By 2003, Gateway's U.S. PC had shrunk to 3.5%, underscoring its struggle to maintain relevance against these dominant players. In response to these pressures, Gateway attempted diversification beyond its core consumer PC business, launching initiatives targeted at new segments. In 2001, the company expanded into the market with dedicated product lines and services aimed at corporate customers, formalizing a hardware-focused business unit as part of a broader to stabilize operations. These efforts, however, failed to reverse the revenue slide, as did Gateway's entry into with the introduction of a 42-inch plasma in November 2002, priced at $2,999 to undercut competitors and appeal to home entertainment buyers. The plasma launch generated initial buzz but did not significantly offset PC market losses, highlighting the challenges of pivoting away from declining core sales. To address mounting losses, Gateway implemented aggressive cost-cutting measures, including major workforce reductions and operational shifts. In August 2001, the company announced layoffs of about 5,000 employees, representing 25% of its global workforce of roughly 19,000, primarily to eliminate redundancies and exit unprofitable international markets. These cuts were followed by the closure of all 188 company-operated retail stores in April 2004, resulting in an additional 2,500 job losses, as Gateway abandoned its brick-and-mortar strategy in favor of third-party retail partnerships to reduce overhead. Concurrently, in 2001, Gateway relocated its headquarters from , , to , a of , to lower real estate costs and improve operational efficiency amid the financial strain.

2004–2007: eMachines Acquisition and Cost-Cutting Measures

In March 2004, Gateway completed its acquisition of for $289 million, consisting of $30 million in cash and 50 million shares of Gateway stock. This move integrated ' budget-oriented and desktop lines, which targeted cost-conscious consumers, and brought valuable retail distribution expertise, as products were already available in thousands of stores nationwide. The acquisition was seen as a strategic response to intensifying competition in the PC market, allowing Gateway to diversify beyond its direct-sales model and compete more effectively with low-price leaders like and . The merger contributed to a revenue increase, with Gateway reporting $3.9 billion in fiscal year 2005, a 6% rise from $3.65 billion the previous year. Despite this growth, the company continued to grapple with financial challenges stemming from earlier diversification attempts and market pressures, resulting in ongoing operational losses averaging around $150 million annually prior to the acquisition's full impact. To stem these losses, Gateway implemented aggressive cost-cutting measures, including manufacturing to contract partners in to reduce production expenses and closing its remaining plants in , such as the North Sioux City facility in fall 2004 and the Sioux Falls site earlier that year. These steps led to significant workforce reductions, dropping employee numbers to about 1,800 by the end of 2005, and helped achieve a net profit of $49.5 million in fiscal 2005. As part of its turnaround strategy, Gateway pursued initiatives to refresh its image, building on a simplified introduced in 2002 that featured a stylized "G" within a cow spot to maintain brand recognition while modernizing the design. The company also shifted emphasis toward digital home products, launching media center PCs and entertainment-focused systems compatible with to tap into growing demand for home digital entertainment solutions. These efforts aimed to position Gateway as a provider of integrated home computing experiences, including partnerships for content delivery and hardware. By 2006, Gateway's final full year as an independent , had declined amid persistent price competition and market saturation, totaling approximately $2.9 billion with a return to net losses, underscoring the limitations of these measures in a rapidly consolidating industry.

2007–Present: Acer Acquisition and Brand Integration

In October 2007, Acer Inc. completed its acquisition of Gateway, Inc. for $710 million through a , purchasing all outstanding shares at $1.90 each, which resulted in Gateway being delisted from the . This transaction integrated Gateway as a brand under Acer, allowing the Taiwanese company to leverage Gateway's established U.S. retail presence while maintaining Acer's dominance in international markets. Following the acquisition, the Gateway brand was retained primarily for consumer PCs , contributing to Acer's expanded footprint in the region, where the combined entity held approximately 10.8% of the PC shortly after the deal. Gateway's operations were folded into Acer's broader portfolio, which generated over $15 billion in annual revenue by 2007, with Gateway's U.S.-focused sales accounting for roughly 10% of Acer's overall American revenue in the initial years post-acquisition. This integration provided Acer with enhanced scale in negotiations and distribution but marked the end of Gateway's independent operations. During the 2010s, Gateway's standalone presence diminished significantly as Acer streamlined its multi-brand strategy, with many Gateway products becoming rebadged versions of Acer's core lineup by around , particularly in consumer segments like netbooks and laptops. The brand saw reduced visibility outside niche retail channels, reflecting Acer's focus on consolidating resources amid competitive pressures in the PC industry. As of 2025, the Gateway brand is used sparingly by Acer, primarily for budget-oriented laptops and tablets sold exclusively through retailers like in , without introducing major innovations or new product categories. This limited revival, initiated in 2020, positions Gateway as an entry-level option rather than a marque.

Products and Innovations

Desktop and Laptop Computers

Gateway's desktop computers formed the foundation of its product lineup, starting with the Gateway 2000 series introduced in 1987 as affordable IBM-compatible systems powered by Intel 386 processors. These early models emphasized value through direct sales, allowing customers to select configurations such as RAM, hard drive capacity, and peripherals, which set Gateway apart in the competitive PC market. By the early 1990s, the series had transitioned to Intel 486 processors, offering improved performance for business and home users with options like the 4DX2-66V tower, which included VESA local bus graphics for enhanced multimedia capabilities. A significant in Gateway's desktop offerings was the adoption of black-and-white cow-spotted packaging in the , reflecting the company's roots and creating a memorable identity for shipping full-tower systems. These desktops supported customizable specifications, evolving from 486-based setups to and processors by the late and early , with features like upgradable motherboards and support for up to 1GB of RAM in later models. Gateway entered the laptop market in 1995 with the Solo series, featuring processors at speeds of 75MHz and 90MHz, bundled with for portable computing. The series prioritized multimedia integration, including Sound Blaster-compatible audio and 11- to 12-inch TFT displays, making it suitable for professionals and students. The Solo 2100, released in 1996, exemplified the line's thin-and-light design with a 133MHz CPU, 16MB of RAM, and an 11.3-inch screen, weighing under 7 pounds for improved mobility. Following the 2004 acquisition of , Gateway shifted toward budget-friendly models influenced by eMachines' cost-efficient designs, introducing the GT series desktops in 2005 with 64 processors and integrated graphics for entry-level media center use. These systems offered 512MB to 1GB of DDR RAM and 160GB to 250GB hard drives at prices under $1,000, appealing to value-driven consumers. By 2007, Gateway's desktops and laptops had evolved to incorporate and processors, aligning with industry standards before the Acer acquisition integrated the brand into broader product ecosystems.

Consumer Electronics and Peripherals

In an effort to diversify amid competitive pressures in the PC market during the early 2000s, Gateway expanded into with the launch of its first plasma television in November 2002. The 42-inch model, featuring enhanced definition resolution, was priced at $2,999—significantly lower than many competitors at the time—and was available through both direct sales and Gateway's retail stores. Gateway also offered peripherals designed to enhance home computing and entertainment, including bundles with webcams and printers often packaged with PC purchases to provide complete user setups. A notable example was the Destination series of big-screen PCs, which integrated TV tuners for seamless media viewing and were promoted as all-in-one entertainment solutions in 1996. Under the Gateway Connected Home initiative, the company ventured further into portable consumer electronics between 2003 and 2005, introducing MP3 players such as the DMP-200, a 128MB flash-based device priced at $129 that supported USB connectivity for music and data transfer. Complementing this, Gateway launched its first digital cameras, including 2-megapixel and 5-megapixel models ranging from $129 to $399, aimed at both novice and experienced users with features like compact designs and bundled software. Following the 2004 acquisition of eMachines, Gateway incorporated low-cost peripherals into its lineup, such as affordable optical drives integrated into budget desktop systems to appeal to value-conscious consumers. These additions helped streamline production and reduce costs in the consumer segment. Most of Gateway's non-PC product lines, including plasma TVs, MP3 players, and digital cameras, were phased out by 2007 as part of cost-cutting measures after the acquisition by Acer, which refocused the brand on core computing hardware.

Marketing and Branding

Iconic Cow-Spotted Design

Gateway, Inc. introduced its distinctive cow-spotted packaging in 1991, drawing inspiration from the company's roots in Iowa's heritage. The design featured white shipping boxes adorned with irregular black spots mimicking the markings of cows, a nod to founder Ted Waitt's family background in farming. This visual motif quickly became synonymous with Gateway's model, where computers were shipped nationwide in these eye-catching containers, helping the brand stand out in a crowded market. The cow-spotted aesthetic extended beyond packaging to encompass store interiors and various merchandise, reinforcing Gateway's folksy, Midwestern identity. Gateway Country retail outlets were decorated with the black-and-white pattern on walls and fixtures, creating an immersive for customers. Promotional items, such as apparel and accessories, also incorporated the spots, further embedding the design into the company's culture and consumer recognition. In 1992, Gateway registered the black-and-white cow-spots design as a with the United States Patent and Trademark Office for use in association with computers and peripherals, providing legal protection for this signature element. Over time, the design evolved to align with shifting market perceptions. By late , Gateway began phasing out the cow spots on shipping boxes as part of an effort to to corporate clients with a more professional image. In the early , the company partially retired the original irregular Holstein pattern, transitioning to a stylized, symmetrical black spot that evoked the cow theme without overt farm imagery, aiming for a sleeker aesthetic amid competitive pressures. Despite these changes, the cow spots remained a cultural of Gateway, symbolizing its innovative approach to branding in the industry. Following Acer's 2007 acquisition of Gateway, the brand was largely dormant until 2020, when Acer relaunched Gateway laptops and tablets exclusively at , reviving the iconic cow-spotted packaging to capitalize on nostalgic .

Advertising Campaigns and Partnerships

Gateway's early advertising efforts centered on leveraging its rural Midwestern origins to differentiate itself in the competitive PC market. In February 1988, the company launched its first national campaign with the tagline "Computers from ?" featured in full-page magazine ads and television spots, humorously questioning the source of advanced technology from a Sioux City farm while underscoring its model and U.S.-made products. This approach helped build recognition by contrasting Gateway's approachable, no-frills against more corporate rivals. As Gateway expanded in the , it deepened partnerships with key technology providers to enhance its marketing reach. The company participated in 's "Intel Inside" program, co-funding campaigns that promoted processors in Gateway systems through TV and print ads, positioning its computers as reliable gateways to advanced computing. Similarly, Gateway pre-installed Windows on its PCs, integrating with Microsoft's ecosystem and featuring joint promotional efforts that highlighted seamless software compatibility for consumers. These collaborations amplified Gateway's visibility during the processor and OS wars of the era. Gateway escalated its promotional investments with high-profile media buys, including advertisements in the early 2000s that incorporated the iconic cow-spotted visuals to reinforce brand memorability. A spot featured a talking cow pitching the Gateway 700XL model, exemplifying the company's humorous, folksy style amid dot-com era competition. Following the 2004 acquisition of , campaigns shifted toward value-oriented messaging, such as emphasizing affordable configurations to appeal to budget-conscious buyers. Slogans evolved accordingly, from the customer-centric "People Rule" introduced in 2000 to more deal-focused taglines like "A better way" by . By the late , annual media spending had reached around $200 million, fueling national TV, print, and online efforts during peak years.

Corporate Structure and Leadership

Key Executives and Founders

Gateway, Inc. was co-founded in 1985 by and Mike Hammond, who started the company as TIPC Network in a farmhouse on Waitt's family cattle ranch near , with a $10,000 loan secured by Waitt's grandmother. Waitt, born in 1963, served as the principal executive, guiding the company's early emphasis on direct-mail sales of affordable personal computers, while Hammond, an Iowa native born in 1961, acted as the early technical lead responsible for product assembly and operations in the startup phase. Hammond departed the company sometime after 2001 to pursue other ventures, including founding Dakota Muscle, a restoration business in North Sioux City, . Waitt held the position of CEO from the company's inception through December 1999, during which he prioritized rapid growth through innovative marketing and cost efficiencies that propelled Gateway to become one of the largest PC makers in the U.S. He returned as CEO in January 2001 amid financial challenges, serving until 2004, when he stepped down as part of a transition. Jeff Weitzen, a former executive, succeeded Waitt as CEO in late 1999 but held the role for only 13 months before resigning in early 2001; during his brief tenure, he focused on international expansion and operational streamlining. Wayne Inouye took over as CEO in March 2004, leading efforts to refocus on core PC sales and achieve profitability, before abruptly resigning in February 2006 to pursue other opportunities. served as interim CEO from February to September 2006, followed by J. Edward Coleman, who led the company until the Acer acquisition in 2007. Waitt's returns to , including his 2001 reprise, were often in response to operational crises, reflecting his ongoing influence as chairman until his full retirement in 2005. Under Waitt's direction, Gateway cultivated an informal corporate culture that emphasized agility and employee comfort, including a well-known policy discouraging suits and ties to foster a relaxed, innovative environment reminiscent of the company's rural origins. This approach supported explosive growth, with Gateway's market value peaking in the late 1990s; Waitt's personal net worth reached approximately $6 billion by the end of 1999, based on his substantial ownership stake. Following Gateway's in 1993, the board was expanded. Waitt's leadership also extended briefly to key strategic decisions, such as acquisitions, where he played a role in evaluating opportunities to bolster Gateway's market position.

Major Acquisitions and Organizational Changes

Gateway, Inc. acquired Technologies in 1997 for approximately $13 million from the bankrupt German firm , aiming to leverage Amiga's advanced technologies to enhance its PC offerings. This move provided Gateway with 47 patents related to processing, though the company later struggled to capitalize on the technology and sold the Amiga trademarks and inventory to Amino Development Corporation in late 1999 for $5 million while retaining the patents. In 2004, Gateway acquired , a leading low-cost PC manufacturer, in a deal valued at approximately $235 million consisting of $30 million in cash and 50 million shares of Gateway stock, to strengthen its position in the budget segment of the consumer PC market. The acquisition created synergies by combining Gateway's direct-sales model with eMachines' retail expertise, but it also prompted significant cost-cutting, including a 25% reduction in global workforce to streamline operations and focus on profitability. As part of these efforts, Gateway closed all 188 of its company-owned retail stores in April 2004, laying off about 2,500 employees and shifting entirely to online and third-party retail channels. Gateway also pursued divestitures to refocus on core PC business. In 2001, the company closed its European headquarters in , , and ceased operations in the UK and , laying off around 850 employees amid intense regional competition and price pressures. This exit from marked a strategic retreat to the North American market. Organizationally, Gateway transitioned from a private company to a public entity with its in December 1993 on the under the ticker GTW, raising capital to fuel rapid expansion. In 2007, acquired Gateway for $710 million in an all-cash , taking the company private and delisting it from the NYSE. Post-acquisition, Gateway was integrated into Acer's global structure as a , with the Gateway brand retained exclusively for the U.S. market to target value-oriented consumers while Acer focused on premium segments elsewhere.

Legacy and Current Status

Impact on the PC Industry

Gateway played a pivotal role in popularizing the sales model for personal computers during the late and , operating alongside as one of the early adopters of this approach. By selling customized systems directly to customers via and later , Gateway eliminated retail markups and costs, enabling it to offer competitively priced PCs that made computing more accessible to average consumers. This model significantly influenced PC affordability, with Gateway frequently undercutting competitors' prices, thereby pressuring the industry to adopt similar efficiencies. The company's strategy contributed to the of personal computing , where household computer ownership rose to 51% by 2000, partly due to budget-oriented options from direct sellers like Gateway. At its peak, Gateway commanded approximately 9.3% of the U.S. PC market by the end of 1999, helping to expand the consumer base beyond early adopters and into mainstream households. Additionally, Gateway's innovations in bundling essential software and peripherals—such as monitors, keyboards, and pre-installed applications—as standard components of its systems enhanced overall value, compelling traditional IBM-compatible clone manufacturers to follow suit and further standardize complete PC packages. Gateway's farm-to-tech origin story, beginning in an farmhouse founded by , son of cattle farmers, served as an inspirational narrative for aspiring entrepreneurs, illustrating how bootstrapped ventures could disrupt established tech sectors and motivating a wave of startups in the . The brand's distinctive black-and-white cow-spotted packaging and boxes became enduring pop culture icons, symbolizing the approachable, American ingenuity of the PC revolution and appearing in media, advertisements, and consumer . However, Gateway's aggressive tactics also drew industry critiques for fueling fierce price wars, such as the reductions that dropped system costs by hundreds of dollars, which accelerated the of PCs by eroding profit margins and shifting focus from differentiation to volume sales across the sector.

Post-Acquisition Developments and Brand Usage

Following its acquisition by Acer in 2007, the Gateway brand was retained primarily for entry-level personal computers targeted at the U.S. market, benefiting from shared resources across Acer's portfolio. In the 2010s, Acer pursued revival efforts for the Gateway brand, including the introduction of ultra-thin notebooks in 2010 and the TP-A60 tablet in 2011, which featured a 10.1-inch multi-touch display and was positioned as an affordable Android device. These initiatives aimed to leverage Gateway's established American identity while integrating Acer's manufacturing efficiencies, though the brand's product lineup remained limited compared to Acer's core offerings. By the 2020s, Gateway's role had narrowed significantly, with Acer reviving the brand in 2020 for exclusive sales at , focusing on budget laptops, 2-in-1 convertibles, and tablets priced under $500, such as -powered models with Full HD displays. As of 2025, these -exclusive devices, including all-in-one desktops like the 23.8-inch FHD IPS model with processors, continue to be offered, but Gateway operates without independent infrastructure, fully subsumed under Acer's global operations. Post-acquisition integration shifted focus toward Acer's primary brand for international expansion and higher-end segments, impacting Gateway's distinct identity, with Gateway products often being variants of Acer designs rebranded for the low-cost U.S. retail channel. Recent emphasizes , incorporating the iconic cow-spotted packaging to appeal to longtime U.S. consumers.

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