Gateway Incorporated, an Acer Inc. subsidiary, is a computer hardware company headquartered in Irvine, California, USA which develops, manufactures, supports, and markets a wide range of personal computers, computer monitors, servers, and computer accessories. It became a well-known brand in 1991 when it started shipping its computer hardware in cow-spotted boxes and for its creative advertising in Computer Shopper and other magazines. In the early and mid-2000s, the company struggled; after years as a fixture on the Fortune 500 list of largest companies worldwide, the company was not listed in 2006, having dropped to number 508.
On September 4, 2007 Gateway announced that it had signed a definitive agreement to sell its professional business segment to MPC Corporation. This includes the company's Nashville-based configuration center.[1] MPC subsequently ceased its services and filed for bankruptcy protection in early 2009, leaving Gateway business customers stranded without access to support or warranty services. This incident has caused substantial damage to the Gateway brand.[2]
On October 16, 2007, Acer Inc. completed its acquisition of Gateway for approximately US$710 million.[3] Its final share price of US$1.90 was far below the US$4.00 average price in the mid 1990s and drastically below a high of US$84 in late 1999. The US$1.90 per share was just barely over half of the split-adjusted IPO price of US$3.75 in 1993.

Founded in 1985 in an Iowa farmhouse, Gateway has grown into one of America's best-known brands with millions of satisfied customers. Starting with a $10,000 loan guaranteed by his grandmother, a rented computer and a three-page business plan, Ted Waitt turned Gateway into a revolutionary company whose innovations helped shape the technology industry.

The company—previously called Gateway 2000—received national acclaim in 1991 when it introduced its distinctive cow-spotted boxes, a tribute to its farm heritage. In 1993, it cracked the Fortune 500 and went public, trading on the NASDAQ before moving to the New York Stock Exchange in 1997. The following year, Gateway shifted its headquarters from North Sioux City, South Dakota, to the San Diego area. In early 2004, the company acquired eMachines, one of the world's fastest-growing and most efficient PC makers. The company moved its headquarters to Irvine, California in September 2004.

In October 2007, Gateway was acquired by Taiwan-based Acer Inc., and the combined entities now comprise the third-largest PC company in the world.

Gateway always has been devoted to treating customers with respect and decency while focusing on service, quality and value.

Gateway, since its earliest days, has pioneered numerous industry trends and practices. It was the first PC company to offer systems with color monitors as standard, the first to offer a standard three-year warranty and the first to commercially explore convergence of the PC and television. It was one of the nation's early "bricks and clicks" retailers, and it was among the first direct retailers to sell its own branded consumer electronics with the launch of the highly successful Gateway® plasma TV and digital display.

As Gateway pushes into new frontiers, it remains dedicated to its original objective of helping people improve their lives through technology.

January 2001 Waitt, a largely hands-off chairman but one who had grown increasingly concerned about the deteriorating situation at the company he had built, reassumed the CEO position, ousting Weitzen and several other top managers. In addition to restating downward the financial results for 2000, Waitt launched a thorough restructuring, brought back a number of old-timers, and adopted a "back to basics" approach reemphasizing Gateway's core business of selling PCs directly to consumers and businesses. Toward the latter end, prices were slashed, in some cases matching Dell's as well as those of the newly bolstered Hewlett-Packard, which acquired Compaq during this period. Cost-cutting initiatives during 2001 were massive. The workforce was reduced from 24,600 to 14,000 as U.S. call center facilities were consolidated; 33 retail stores in the United States and 11 in Canada were closed; manufacturing plants in Lake Forest, California, Ireland, and Malaysia were shut down; and substantially all of the company's international operations were shuttered in order to focus exclusively on the U.S. market. Gateway also moved its headquarters to Poway, a San Diego suburb, during 2001. Special charges for the year totaling $1.1 billion led to a net loss of $1.03 billion. Revenues plunged 38 percent, from $9.6 billion to $5.94 billion.
As the price war and decline in home-PC shipments continued, sales plummeted further in 2002, dropping to $4.17 billion. PC unit sales fell to 2.75 million from the previous year's 3.4 million. Gateway's share of the U.S. PC market dropped to 6.1 percent, down from 9.3 percent at the end of 1999. Gateway fell short in its attempt to counter the PC decline with a push into consumer electronics, such as plasma televisions and digital cameras. The company slashed its payroll by a further 2,500 employees as part of another restructuring that involved the closure of 19 additional stores, two telephone call centers, an engineering operation, and an Internet sales site. Pretax restructuring charges amounted to $109 million, contributing to a net loss for the year of $297.7 million. Gateway's stock ended 2002 trading at just $3.14 per share.
In January 2003 Gateway launched yet another restructuring to close 76 of its remaining 268 retail stores, resulting in the dismissal of 1,900 more employees. In April the company was forced to make another restatement of its past financial results, admitting that it overstated its revenue for 1999 through 2001 by $476 million. The Securities and Exchange Commission (SEC) followed up with a lawsuit filed in November 2003 that accused former CEO Weitzen, former CFO John J. Todd, and former controller Robert D. Manza of fraud, lying to auditors, and other violations of securities law. The three were charged with inflating revenue during 2000, when Gateway began struggling to meet analysts' expectations. The company itself reached a settlement with the SEC on charges of filing false statements and misleading investors, by agreeing to not violate securities laws in the future. No fine was levied on Gateway.
As these accounting machinations were playing out in the background, Gateway was stepping up its push into consumer electronics. During 2003 the firm introduced 118 new products in 22 categories, including DVD players, home theater systems, LCD televisions, digital projectors, personal digital assistants (PDAs), digital music players, and media center PCs that combined the functions of a computer, television, and video recorder. All 192 of Gateway's remaining retail stores were completely remodeled to better display this avalanche of new products. The portion of revenue deriving from consumer electronics and other non-PC products jumped from 19 percent in 2002 to 28 percent in 2003. Gateway also continued its effort to bump up its sales to business customers by enhancing its offerings of servers and storage devices. During the third quarter of 2003, meanwhile, the company restructured yet again, closing down its computer-assembly operation in Hampton, Virginia, and making significant cuts at its PC assembly and refurbishing operations in North Sioux City and Sioux Falls, South Dakota. These and previous closures of manufacturing operations meant that Gateway was increasingly using contractors--mainly Taiwanese--to manufacture the notebook and desktop computers it sold. Job cuts of 1,700 left Gateway with just 7,400 workers by year end, fewer than one-third the total of three years earlier. The net loss of $514.8 million for 2003 reflected in part $148 million in restructuring charges. On a somewhat more positive note, Gateway managed to post a 2003 operating loss of $510.6 million, roughly the same as the 2002 total despite revenues having fallen a further 18 percent, to $3.4 billion. Once the nation's second largest computer seller, Gateway's market share of 3.7 percent was good for only fifth place, behind Dell, Hewlett-Packard, IBM, and upstart eMachines.
The "eMachining" of Gateway, 2004
After three straight years in the red, Gateway shifted gears in 2004. The company announced in January that it had agreed to buy the privately held eMachines for 50 million shares of Gateway stock and $30 million cash. When completed in March 2004 the deal was valued at nearly $300 million. Under the leadership of Wayne Inouye, president and CEO of the low-cost computer marketer since February 2001, eMachines had enjoyed nine straight profitable quarters through relentless cost-cutting and improvements in product quality and customer service. All of eMachines' computers were manufactured by third-party contractors, and they were sold through retail outlets, including Best Buy, Circuit City, CompUSA, Costco, Fry's, Sam's Club, and Wal-Mart stores. By early 2004, eMachines had captured 25 percent of the U.S. retail PC market. The company also distributed its products overseas through retailers in Japan, the United Kingdom, and Western Europe. Founded in 1998 and based in Irvine, California, eMachines had about $1.1 billion in sales in 2003. At the time of its acquisition by Gateway, it employed only about 140 people. By acquiring eMachines, Gateway jumped back up to the number three position among U.S. PC companies--with a market share of nearly 7 percent--and ranked as the eighth largest player in the world market.
Upon completion of the deal, Inouye, who before joining eMachines had served as senior vice-president of computer merchandising at Best Buy from 1995 to 2001, was named president and CEO of Gateway. Waitt remained chairman. Several top executives at eMachines took similar positions at Gateway. Further evidence of the "eMachining" of Gateway came in April 2004 when the company announced that it would close its remaining retail stores, dismiss their 2,500 employees, and shift to selling Gateway computers through third-party retailers--thereby adopting the eMachine approach. Direct selling via call centers and the Internet would nevertheless continue. Coupled with a previously announced cut of 1,000 jobs, mostly in manufacturing and support operations in Iowa and South Dakota, the workforce would thereby be trimmed to about 4,000 workers. Furthermore, Gateway also announced in April that it would close down its head office in Poway and move to California's Orange County, where eMachines was based. Further workforce reductions--perhaps reducing the payroll to around 2,000--seemed imminent as Gateway continued to adopt eMachines's low-cost model in its latest attempt to return to profitability.
Principal Subsidiaries: Advanced Logic Research, Inc.; Cowabunga Enterprises, Inc.; eMachines, Inc.; Gateway Accessory Stores, Inc.; Gateway Asia, Inc.; Gateway Companies, Inc.; Gateway Country Stores LLC; Gateway International Holdings, Inc.; Gateway Japan, Inc.; Gateway Manufacturing LLC; Gateway PC LLC; Gateway Technologies, Inc.; GW Holdings LLC; Nicholas Insurance Company Ltd. (Bermuda); North Merrill Maintenance LLC; Spotware Technologies, Inc.
Principal Competitors: Dell Inc.; Hewlett-Packard Company; International Business Machines Corporation; Apple Computer, Inc.; Sun Microsystems, Inc.

Statistics:
Public Company
Incorporated: 1986 as Gateway 2000, Inc.
Employees: 4,000
Sales: $3.4 billion (2003)
Stock Exchanges: New York
Ticker Symbol: GTW
NAIC: 334111 Electronic Computer Manufacturing; 334112 Computer Storage Device Manufacturing; 334119 Other Computer Peripheral Equipment Manufacturing; 454110 Electronic Shopping and Mail-Order Houses

Key Dates:
1985: Working out of a Sioux City, Iowa, farmhouse, Ted Waitt and Mike Hammond launch TIPC Network, selling peripheral hardware and software to owners of Texas Instrument computers via mail order.
1986: Company is incorporated as Gateway 2000, Inc.
1987: Gateway begins selling IBM-compatible computer systems, priced lower than competitors.
1990: Gateway relocates to North Sioux City, South Dakota; revenues quadruple that year, reaching $275 million.
1992: Company releases its first notebook computer; revenues reach $1.1 billion.
1993: Gateway establishes a marketing and manufacturing headquarters in Dublin, Ireland; company goes public.
1996: Company begins opening retail showrooms in the United States; customers can now custom configure, order, and pay for a personal computer via the Gateway web site.
1998: Company begins operating as simply Gateway, dropping the "2000"; headquarters are moved to San Diego.
1999: Gateway, Inc. is officially adopted as the corporate name.
2000: Company is hit hard by global PC industry downturn, leading to plunging profits and a net loss during the fourth quarter.
2001: Massive restructuring is launched involving significant consolidation and closures of facilities and the elimination of 9,400 jobs; net loss of $1.03 billion is recorded.
2003: Push into consumer electronics accelerates.
2004: Gateway acquires eMachines, Inc. for nearly $300 million; it announces it will close its remaining retail outlets and begin selling Gateway products through third-party retailers.
Gateway, Inc.
7565 Irvine Center Drive
Irvine, CA 92618
Customer Service
P.O. Box 6137
Temple, TX 76503
 
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