Gateway, Inc.

Gateway, Inc.

Company type	Public (after 1993 IPO)
Industry	Computer hardware
Predecessor	TIPC Network
Founded	1985 (1985)
Founder	Ted Waitt, Mike Hammond
Fate	Acquired by Acer Inc. in 2007
Headquarters	La Jolla, California (from 1999) , United States
Area served	Worldwide
Key people	Ted Waitt (founder, former CEO), Jeff Weitzen (former CEO)
Products	Personal computers, monitors, servers, accessories
Number of employees	~25,000 (2000)
Parent	Acer Inc. (from 2007)

Gateway, Inc., initially known as Gateway 2000, Inc., was an American technology firm established in 1985 by entrepreneurs Ted Waitt and Mike Hammond. Originally based in Iowa and South Dakota, Gateway specialized in designing, producing, and distributing a wide array of personal computers, monitors, servers, and related accessories. At its height around the year 2000, the company employed close to 25,000 individuals worldwide. Following several years marked by financial difficulties and organizational restructuring—including the 2004 acquisition of competitor eMachines—Gateway was ultimately purchased by Taiwanese electronics manufacturer Acer Inc. in 2007 for $710 million.

1985–1990: Establishment

Gateway began as TIPC Network in September 1985, founded by Ted Waitt and Mike Hammond. Ted Waitt, the primary founder and strategic leader, was soon joined by his brother Norman Waitt Jr., who took on the role of financial advisor. Prior to starting Gateway, Ted gained experience working at a computer retail store where he recognized an unserved market segment seeking affordable yet capable computing solutions positioned between low-end and premium products. This observation shaped Gateway’s business approach targeting customers desiring a balance of performance and cost.

Initially focusing on software and peripherals for the discontinued Texas Instruments Professional Computer, Gateway soon transitioned to assembling custom-built PCs sold through mail order. Early capital came from a $10,000 loan provided by Ted’s grandmother and operating out of his father’s cattle brokerage office. To raise startup funds, the company charged a $20 membership fee and achieved $100,000 in sales within the first four months.

By late 1986, TIPC Network rebranded as Gateway 2000 and reached $1 million in revenue. The company’s major breakthrough occurred in 1987 with the introduction of IBM PC-compatible systems priced at $1,995—approximately half the price of competitors—utilizing mail-order distribution to minimize expenses. Revenue climbed sharply from $1.5 million in 1987 to $12 million in 1988.

Gateway’s initial strategy emphasized sourcing components from third-party suppliers rather than investing heavily in internal engineering or design teams. This streamlined approach enabled competitive pricing aimed at budget-conscious buyers who valued cost-effectiveness over extensive technical support.

In 1988, Gateway relocated its headquarters to downtown Sioux City and launched its first significant advertising campaign highlighting affordable pricing and Midwestern origins with the slogan "Computers from Iowa with a question mark." This marketing initiative helped drive sales to $70.6 million by 1989, solidifying Gateway’s early market position and brand recognition within the computer hardware sector.

1990–1995: Expansion Phase

In January 1990, Gateway 2000 moved its main offices to North Sioux City, South Dakota to take advantage of the state's absence of income taxes. That same year, the company expanded its advertising efforts with humorous campaigns featuring employees—including founder Ted Waitt—and adopted a distinctive black-and-white cow-spotted motif for shipping containers that reinforced its Midwestern brand identity while reducing packaging costs.

By the end of 1990, Gateway 2000 reported revenues of $275 million. To better manage rapid expansion, the founders brought in executives from rival firms and created specialized divisions focused on marketing, technological innovation, strategic planning, and advertising oversight.

In 1991, Gateway constructed a new 44,000-square-foot manufacturing facility near its headquarters to increase production capacity by 30%. The company also broadened its focus to include fleet sales targeting corporate clients by offering training programs and enhanced customer support services. Although remaining privately held, Gateway began releasing quarterly financial statements to build trust with business customers. Sales reached $626 million by year-end.

Despite increasing investment in research and development, Gateway fell behind in innovation and responded by segmenting its marketing efforts to address specific customer groups. It introduced the AnyKey keyboard designed for power users and launched the HandBook subnotebook in 1992 aimed at executive professionals. The company expanded its support and sales workforce by 200 employees to reach a total staff of 1,700 and reported $1.1 billion in sales that year. Gateway became the leading mail-order computer seller in the U.S., even amid intense price competition initiated by Compaq.

During the second quarter of 1993, Gateway encountered its first drop in revenue attributed to quality control challenges and a stagnant product line. To counter this decline, it released updated notebook models featuring improved displays and intensified efforts targeting corporate clients by establishing a major accounts division headed by an executive from IBM. The technical support team doubled to over 400 personnel with dedicated representatives assigned to large clients. In October 1993, Gateway inaugurated a European subsidiary based in Dublin, Ireland encompassing manufacturing operations as well as sales, marketing, and customer service functions.

To fund growth initiatives and offset rising expenses associated with corporate sales expansion and European operations, Gateway announced plans for an initial public offering (IPO) in October 1993. The December IPO raised $163.5 million through the sale of 10.9 million shares representing approximately 15% ownership; founder Ted Waitt retained an 85% stake. The capital influx facilitated diversification into networking equipment (such as fax modems), peripherals (including printers), and software products. By the conclusion of 1994, Gateway employed around 5,000 people and recorded revenues totaling $2.7 billion.

1995–2000: Significant Growth and Expansion

In September 1995, Gateway 2000 committed between $18 and $20 million to establish a manufacturing plant in Hampton, Virginia, alongside inaugurating a production facility in Malaysia aimed at serving the East Asian market. That August, the company acquired an 80% ownership interest in the Australian retailer Osborne, and by November, Gateway launched its inaugural website, gw2k.com. During the same year, the company reported revenues totaling $3.7 billion.

The following year, Gateway introduced the Destination 2000, an early iteration of a home theater PC featuring multimedia capabilities and an integrated modem. Despite its innovative design, the product experienced weak sales and was frequently sold at discounted prices in retail chains such as CompUSA.

By March 1997, Gateway had begun establishing physical "Country Stores" within suburban areas across the United States. These locations served primarily as product showrooms without on-site sales; customers placed orders via telephone or online. The first store opened in Tampa, Florida. By 1999, the number of these stores exceeded 140.

In April 1997, discussions surfaced regarding a potential acquisition of Gateway by Compaq to strengthen Compaq’s mail-order business, with a proposed $7 billion bid that was nearly accepted before CEO Ted Waitt ultimately rejected it that summer.

Gateway further expanded through acquisitions: in May 1997, it purchased the bankrupt German company Amiga Technologies for $13 million—acquiring valuable multimedia patents—and established Amiga International as a subsidiary. The following month, Gateway completed a $194 million stock transaction to acquire Advanced Logic Research (ALR), a manufacturer specializing in high-end workstations and servers.

Toward the end of 1997, Gateway began retiring its iconic cow-themed branding to better appeal to corporate clients and introduced Gateway Major Accounts to target enterprise fleet sales. The company closed the year with revenues of $6.29 billion and net earnings of $1 billion.

In preparation for the upcoming millennium, Gateway dropped "2000" from its corporate name in 1998 and formally reincorporated as Gateway, Inc. in May 1999. The headquarters relocated from South Dakota to La Jolla, California—reflecting CEO Ted Waitt’s preference and providing access to a broader technology talent pool. New leadership additions included Jeff Weitzen from AT&T, who assumed roles as president and COO.

Under this new management team, Gateway shifted its strategic focus toward IT services, software solutions, enterprise finance and training programs, as well as consumer peripherals amid declining PC profit margins. The company also launched its own internet service provider, Gateway.net, positioning itself against competitors like AOL. Beginning in June 1998, Gateway preinstalled Netscape Navigator alongside Microsoft’s Windows browsers on its computers.

Despite these efforts, subscriber growth for Gateway.net was sluggish; by early 1999, it had approximately 200,000 users and encountered service interruptions. In February of that year, Gateway transitioned its network backbone to MCI WorldCom and offered one year of free internet service with PC purchases over $1,000, resulting in subscriber numbers tripling to around 600,000 by October. Subsequently, AOL acquired operational control of Gateway.net in exchange for an $800 million equity stake.

In December 1999, Ted Waitt stepped down as CEO while retaining his position as chairman; Jeff Weitzen succeeded him as CEO. Early during Weitzen’s leadership, the company approved the sale of Amiga International’s patents and trademarks to Amino Development Corporation (later renamed Amiga Inc).

2000–2004: Decline and Expansion into Consumer Electronics

The downturn in the PC industry during the early 2000s significantly affected Gateway, which had a strong dependence on the small business and home office sectors. In contrast, Dell, concentrating on corporate customers, managed to endure the market slump more effectively.

Under the leadership of CEO Jeff Weitzen, Gateway departed from its traditional sales approach by distributing PCs through retailers such as OfficeMax and QVC. However, a competitive price battle with Dell resulted in a $94.3 million loss during the fourth quarter of 2000. Net earnings declined to a range between $241.5 million and $316 million, while the company's stock value plummeted from $72 to $18 per share.

PC market share as of July 30, 2001

U.S. Rank	Company	U.S. Market Share (%)	Global Market Share (%)
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 early 2001, founder Ted Waitt removed Weitzen from his position and resumed the role of CEO, launching an extensive restructuring aimed at prioritizing PC sales over software and services. Prices were reduced aggressively to rival competitors like HP and Dell, while unprofitable products such as the AOL-associated Touch Pad were discontinued. Workforce downsizing reduced employee numbers from 24,600 to 14,000 as manufacturing facilities in Malaysia, Ireland, and California were shut down; most international subsidiaries were closed to concentrate on the U.S. market. The company also moved its headquarters to Poway, California. By the end of 2001, Gateway reported a net loss of $1.03 billion on revenues of $5.94 billion.

In 2002, revenues further declined to $4.17 billion with unit shipments dropping from 3.4 million to 2.75 million, and U.S. market share shrinking from 9.3% in 1999 to 6.1%. The company closed 19 Country Stores along with two call centers, an Internet sales office, and a research and development laboratory while laying off 2,250 employees. Gateway recorded a net loss of $297.7 million for the year. Early in 2003, another round of restructuring led to shutting down 76 stores and cutting an additional 1,900 jobs.

In a strategic shift toward consumer electronics during 2003, Gateway introduced 118 new products spanning 22 categories including digital cameras, flat-panel televisions, MP3 players, DVD players, home theater PCs with DVR capabilities, and PDAs. Remaining Country Stores were refurbished to emphasize these new electronics lines. The company also broadened its enterprise product portfolio by adding servers and network storage solutions. Manufacturing operations were largely moved overseas to Taiwanese OEMs following the closure of the Hampton plant and reduced production at North Sioux City and Sioux Falls facilities. By year-end, total staff had been trimmed to approximately 6,900 employees.

Toward the end of 2003, the SEC brought fraud allegations against former CEO Jeff Weitzen and other executives for providing investors with misleading information regarding the company’s financial condition. While Weitzen was acquitted in 2006, CFO John Todd and controller Robert Manza were held accountable for revenue inflation in a trial concluded in March 2007.

2004–2007: Acquisition of eMachines and Organizational Restructuring

In January 2004, Gateway announced its intent to acquire the Irvine, California-based computer maker eMachines for a combination of $30 million in cash and 50 million shares of Gateway stock. Established six years prior as a joint venture involving TriGem, Korea Data Systems, and Sotec, eMachines had achieved $1.1 billion in revenue by 2003 and ranked as the third-largest PC vendor in the United States, despite maintaining a lean workforce of just 140 employees.

By the time the acquisition closed in March, the transaction value had increased to nearly $300 million. This move reinstated Gateway’s position as the third-largest PC manufacturer domestically and eighth worldwide. Wayne Inouye, then CEO of eMachines, succeeded Tedd Waitt as Gateway’s chief executive, while Waitt retained his role as chairman. Shortly thereafter, Gateway shifted its corporate headquarters to Orange County, California, shuttered its remaining retail outlets—resulting in approximately 2,500 job eliminations—and transitioned to a sales model centered on third-party retailers, mirroring eMachines’ approach. By the end of that year, an additional 1,000 positions were cut within manufacturing and support divisions, bringing total employment down to around 4,000.

In February 2006, Inouye stepped down from his CEO role; at this point, Gateway’s employee count had decreased from 7,500 to about 1,800. Later that year in autumn, Gateway briefly reinstated U.S.-based manufacturing with the launch of the Gateway Configuration Center in Nashville, Tennessee. This facility employed over 300 workers focused on assembling customized desktops, laptops, and servers.

2007–Present: Acquisition by Acer

In August 2007, Taiwan’s Acer Inc. completed a tender offer to acquire Gateway, Inc. for approximately $710 million, with the transaction finalized in October of the same year. Simultaneously, MPC Corporation acquired Gateway’s Professional Services Unit—which managed servers, network storage solutions, and workstations—for roughly $90 million; this agreement also closed in October.

Following these acquisitions, Acer positioned both Gateway and eMachines as sub-brands within its portfolio: Gateway was aimed at mid-tier consumers with rebranded personal computers and netbooks, while eMachines targeted entry-level market segments. Due to evolving consumer preferences favoring tablets and convertible devices in the budget category, Acer discontinued the eMachines brand in 2013. Meanwhile, both Gateway and Packard Bell—a former competitor acquired by Acer in 2008—remained active brands until Gateway was eventually phased out.

In September 2020, Acer resurrected the Gateway brand exclusively through Walmart by partnering with Shenzhen-based Bmorn Technology to produce rebadged EVOO laptops under the Gateway nameplate. These devices incorporate sound systems calibrated in collaboration with THX and are designed to capitalize on Gateway’s legacy recognition within affordable ultrabook and gaming laptop markets.

External links

• Gateway (Acer Inc.) worldwide portal
• Gateway (Acer Inc.) United States
• Archived gw2k.com
• Archived gateway2000.com