He also instituted commission and support policies that cost millions and hurt customer satisfaction. Anticipating continued growth in the market, Weitzen opened more than a hundred new Gateway Country Stores and stockpiled a large inventory for the holiday season. Waitt became increasingly frustrated with Weitzen's decisions through the year, culminating in Weitzen's retirement in January.
Waitt immediately fired eight top managers, rehired or reinstated his earlier staff, and revoked a series of initiatives and policies. Gateway entered a long period of retrenchment and rein-vention. Waitt declared a "back to basics" plan in , "selling one computer, one customer, at a time" Fortune , April 30, However, the lower demand and slim-to-nonexistent margins on PC sales resulted in a new emphasis on other products and services a short time later.
In he told Business 2. Instead, Gateway tried offering products and services to small and medium-sized businesses and hoped to transform itself into "branded integrator," offering consumer electronics for the digital home environment.
Gateway had success with a top-selling plasma TV, but profitability still eluded the company, and in March it announced the purchase of eMachines, a company specializing in low-end PCs sold through retailers. At least six other top eMachines executives took positions at Gateway, ousting many who were hired the year before to support Gateway's transformation to a consumer-electronics company.
Waitt remained as board chairman. Inouye quickly announced the closing of all Gateway Country Stores, a new headquarters location in Orange County, California, and the end of manufacturing at the South Dakota facility, although other functions continued to employ 1, there. As of mid the ability of Gateway to thrive or even survive was still in question. Waitt was described by a Gateway shipping operator as "a normal dude, an everyday guy you'd go out and have a pizza with" Fortune , April 30, Charismatic and energetic, he was able to inspire loyalty from his employees with his laid back, rock-n-roll style.
He often visited production, sales, and support facilities, sometimes jumping in to take customer calls himself. While always cost conscious and profit driven, he stuck with his basic values, which he even spelled out respect, caring, teamwork, common sense, aggressiveness, honesty, efficiency, and fun in when outside executives were being brought in to manage the company's growth.
Said a source close to Waitt, "Anyone who really knows Ted Waitt knows that there are things more important to him than money.
Two of those things are Gateway and its people" Time , May 19, He expected the same of his employees, according to Bart Brown, one of Gateway's early hires. But if honesty and integrity are not there, he's got zero tolerance" June 5, Waitt always embraced input from rank-and-file employees, holding company-wide pizza-party meetings at first, and then soliciting ideas for improvement through team meetings. When he reinstated himself as CEO in , he offered employee bonuses for ideas that cut costs or improved service.
Waitt's vision and instincts grew Gateway in the last century, but as of they had not succeeded as well in the new millennium. See also entry on Gateway, Inc. Brull, Steven V. Toggle navigation. Image courtesy Jeff Christensen, Getty Images. They did things short-term to make the income sheet look better, which damaged the balance sheet, which sold the future of the business.
So, when times got tough, there wasn't as much to rely on. Gateway co-founder Mike Hammond. Gateway technically still exists today but only as a shell of its former self. The story of key hardware and electronics companies that at one point were leaders and pioneers in the tech industry, but are now defunct. We cover the most prominent part of their history, innovations, successes and controversies. TechSpot's Gone But Not Forgotten Series The story of key hardware and electronics companies that at one point were leaders and pioneers in the tech industry, but are now defunct.
User Comments: Add your comment to this article. You need to be a member to leave a comment. To increase the company's corporate sales beyond their level of 40 percent, Gateway formed a major accounts team, headed by a former IBM employee.
The company's technical support staff was doubled to more than , and its online technicians were doubled to 14, in order to better service corporate clients. Late in , Gateway inaugurated a separate phone line to provide support services to companies, in which each company was assigned its own personal service representative.
During this time, Gateway also opened its campaign to move into the European market. Previously, foreign sales had accounted for just 3 percent of the company's revenues. In early October, Gateway opened a headquarters in Dublin, Ireland, with sales, marketing, support, and manufacturing facilities. From this base, the company began to sell mail-order computers in Britain. In the future, the company intended to branch out into France and Germany. This plan, however, was complicated by well-established competitors and by the need to customize both machines and marketing programs for each country.
Both Gateway's corporate sales initiative and its expansion into Europe brought with them higher costs than the company had experienced in its South Dakota sales and marketing operations. In an effort to offset the impact of those expenses, Gateway surprised Wall Street by unexpectedly announcing its intention to sell stock to the public in October Waitt and his brother retained the other 85 percent of Gateway.
With this infusion of capital, the company planned to finance current operations, as well as its European push, and also to expand its range of products to include printers, networking products, fax modems, and software. In addition, Gateway announced that it would consider the acquisition of other companies in its field. In the spring of Gateway moved to further enhance its corporate marketing effort.
The company announced a multifaceted overhaul of its support operations to placate disgruntled customers and win new ones. This program involved a two-year extension of Gateway's one-year warranty, hour-a-day phone lines for technical support, and one-day delivery for replacement parts. In May , the company announced that it would continue to provide technical support free of charge, despite the fact that several of its competitors had begun to charge for this service.
The year also saw a manufacturing plant opened in Malaysia to serve Far Eastern markets and establishment of the company's web site at gateway. Early in the company tried its hand at a new product, the Destination , a combination PC and wide-screen TV.
It was designed to be used as a home entertainment center that could also be linked to the Internet. Initial sales were slow, but the company had purposely invested a minimal amount in research and development. The price was also dropped by over 20 percent. During this year a small number of Gateway Country Stores were also opened in suburban locations. These stocked no merchandise, but were intended mainly to offer first-hand contact with the company's products. Computers were still ordered over the telephone and shipped directly to the customer.
Within the next two years over Country Stores were opened. Also in Gateway enhanced its web site to allow customers to configure, order, and pay for a personal computer online.
With Gateway's success came increased interest from other companies bent on acquisition. This move was part of a newly intensified effort by the company to seek a larger share of the business computer market, as penetration of home PCs reached near-saturation levels.
Later in the year, the company announced further measures to increase corporate sales, including removing the ubiquitous cows from its advertising in an attempt to refine its image. Gateway also formed a new subsidiary, Gateway Major Accounts, which focused on sales to business.
During the company dropped the "" from the name it operated under, before the coming millennium made it obsolete the official corporate name did not change to Gateway, Inc. The firm also moved its headquarters to San Diego, a move taken in part to be closer to the mainstream of the business world, and also because CEO Waitt wanted to live in California.
The new management team led an expansion beyond the cutthroat PC market, where brutal competition was steadily ratcheting down profit margins. Gateway pushed deeper into such areas as software, peripherals, services, training, and financing.
The company also attempted to get a piece of the Internet pie, launching a new Internet connectivity service, gateway. In June the company also began to install Netscape Navigator software on its machines along with Microsoft Internet Explorer, which was being bundled with Microsoft's Windows Gateway's Internet service was slow getting off the ground, with only , subscribers by the beginning of Further changes came on the Internet front in More than a third of Gateway PC buyers were soon signing up for the service, pushing the subscriber base to , by October That month, however, Gateway entered into an alliance with America Online, Inc.
Among the other terms of the deal, Gateway computers began prominently placing the AOL online service on their desktop screens, and AOL began promoting Gateway computers on its various online properties. The astounding rise of Gateway came to a crashing halt in when the global PC industry fell into its worst slump ever.
Gateway was hit particularly hard because of its greater reliance on the consumer and small business markets--the hardest hit sectors--and because of questionable management decisions. Soon after taking over, Weitzen began pushing aside old-time Gateway managers and instituted a number of new policies that hurt not only morale but also the bottom line. Weitzen also muddied the company's distribution strategy by launching deals to sell Gateway PCs through such channels as the OfficeMax chain and the QVC home shopping network.
He also opened up more Gateway retail stores in the United States. In January 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 , 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 were massive. The workforce was reduced from 24, to 14, as U. Gateway also moved its headquarters to Poway, a San Diego suburb, during PC unit sales fell to 2.
Gateway's share of the U.
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