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Gateway, Inc.

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Gateway, Incorporated.
Company typeSubsidiary of Acer
IndustryComputer hardware
FoundedSeptember 5, 1985 (as Gateway 2000) (Sioux City, Iowa)
HeadquartersIrvine, California, USA
Key people
J. Edward Coleman, CEO
Richard D. Snyder, Chairman
Ted Waitt, Co-Founder
Mike Hammond, Co-Founder
ProductsDesktops, Laptops, Servers.
RevenueIncrease US$3.980 billion
ParentAcer Inc.
Websitegateway.com

Gateway Incorporated , an Acer Inc. subsidiary, is a computer hardware company headquarted 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.

AOL acquired Gateway.net, the online component of Gateway, Inc., in October 1999 for US$800 million.[1]

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.[2] 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, a company that formerly boasted high marks in customer support reviews. The company has yet to offer any reprieve to customers caught up in the MPC Corporation collapse, leaving hundreds of thousands of Gateway computer owners without access to support and refusing to honor system warranties.[3]

On October 16, 2007, Acer Inc. completed its acquisition of Gateway for approximately US$710 million.[4] Its final share price of US$1.90 is 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 is just barely over half of the split adjusted IPO price of US$3.75 in 1993.

History

File:Gw2klogo2.png
Gateway 2000 logo (1985-1998)
File:Gateway logo.png
Gateway mid logo (October 1998-2003)
File:Gateway cows.jpg
Dolls of the mascot cow, formerly sold by Gateway

Gateway was founded on September 5, 1985, on a farm outside Sioux City, Iowa, by Ted Waitt and Mike Hammond. Originally called Gateway 2000, it was one of the first widely successful direct sales PC companies, utilizing a sales model copied from Dell, and playing up its Iowa roots with low-tech advertisements proclaiming "Computers from Iowa?". Shipping computers in spotted boxes patterned after cow markings (specifically, Holstein cows) became a Gateway standard. In 1989 Gateway moved its corporate offices and production facilities to North Sioux City, South Dakota. In line with the Holstein cow mascot, Gateway opened a chain of retail stores called Gateway Country Stores, mostly in suburban areas across the United States. It dropped the "2000" from its name on October 31, 1998.

To grow beyond its model of selling high-end PCs by phone, and to attract top management and engineers, Gateway relocated its base of operations to La Jolla, California, in May 1998.[5] In an effort to cut operations costs, Gateway made another move, this time to Poway, California, in October, 2001. After acquiring eMachines in 2004, Gateway again relocated its corporate headquarters to Irvine, California.[6][7]

Gateway purchased the Amiga assets from Escom in 1997 and since 2000, this Amiga intellectual property has been licensed to Amiga, Inc..[8][9][10]

Gateway struggled after the dot-com bust and tried several strategies to return to profitability, including withdrawal from international markets, reduction in the number of retail stores and most significantly, entering the consumer electronics business. However, none of these efforts were particularly successful from a financial standpoint, and Gateway continued to suffer major losses as well as market share in the PC business. By April 1, 2004, Gateway had announced that it would shut down its 188 remaining stores.

On March 11, 2004, Gateway purchased low-cost PC marketer eMachines, for US$30 million in cash and 50 million shares of stock, valuing the deal at approximately US$262 million with announced intentions to keep the eMachines brand.[11] Gateway had hopes that eMachines' retail channel strength would complement its own strengths in consumer and business direct channels. Through the deal, founder Ted Waitt turned over day-to-day responsibilities and the CEO role to eMachines' CEO, Wayne Inouye, and remained as chairman through May 2005. Inouye announced his resignation as CEO on February 9, 2006; Chairman Richard D. Snyder served as interim CEO until September 7 2006 when J. Edward Coleman was brought in as the new CEO. At this point, Gateway still sold both Gateway and eMachines brand computers through retail vendors like Circuit City, Best Buy, TigerDirect, Wal-Mart, and CompUSA. Its Gateway brand products continued to be available in direct channels.

Like most large corporations, Gateway has outsourced some of its operations, such as customer support. In 2002, Gateway expanded into the consumer electronics world with products that included plasma screen TVs, digital cameras, DLP projectors, wireless internet routers, and MP3 players. While the company enjoyed some success in gaining substantial market share from traditional leaders in the space, particularly with plasma TVs and digital cameras, the limited short-term profit potential of these product lines led then-CEO Wayne Inouye to pull the company out of that segment during 2004. Gateway still acts as a retailer selling third-party electronic goods online.

Gateway has resourced customer support within North America, priding itself as "100% North America-based support". Gateway also moved build-to-order desktop, laptop, and server manufacturing back to the United States, with the opening of its Gateway Configuration Center in Nashville, Tennessee in September 2006. It employed 385 people in that location. As of April 2007 Gateway notebook computers were produced in China and its desktops had "made in Mexico" stickers.

On October 16, 2007, Acer completed its acquisition of Gateway for US$710 million. J.T. Wang, the company's chairman, said in a statement that the acquisition "completes Acer's global footprint, by strengthening our U.S. presence."[12]

On July 27, 2008, Gateway ended all direct sales from Gateway.com and phone orders. All new Gateway products could now only be purchased from major retailers and on other online sites.[13]

On August 14, 2009, Gateway has relaunched their brand in Australia after a long absence from Australia's market. They will start with the sale of laptops and netbooks. Then later on Gateway expect to launch their desktop line in sync with the launch of Windows 7.[14]

Current products

Hardware

Gateway sells to specific markets including Home & Home Office, Small Business, Gaming, Medium & Large Business, Government and Education. It does not use brand names to market products; rather, Gateway uses product models. It currently markets a range of laptop and desktop products for the home markets including the C140X, NX100X, CX210, NX260X, NX560, and NX860 series.[15] Gateway also markets a range of desktops including the DX420, FX510, FX530, and Profile 6 series. These products are advertised as affordable and productive computers. Gateway's lowest priced system is the DX420B Series, with a monitor sold separately.[16]

Gateway currently sells four LCD-based computer monitors as of January, 2008, featuring 19", 22", 24" and, 30" size displays with the 24" and 30" models featuring screen rotation. Some include USB ports.[17]

In September 2002, Gateway entered the consumer electronics market with aggressively priced plasma TVs. At the time, Gateway's US$2,999 price for a 42" plasma TV undercut name brand competitors by thousands of dollars. In 2003, the company expanded the range of plasma TVs and added digital cameras, MP3 players and other devices. By early 2004, in terms of volume, Gateway had moved into a leadership position in the plasma TV category in the United States. However, pressure to achieve profits after the acquisition of eMachines led the company to phase Gateway-branded consumer electronics out of their product line.

Gateway also markets the C-Series of "Convertible Notebooks", notebook PCs combined with tablet PC technology including handwriting recognition with a stylus much like a personal digital assistant (PDA). They are available through the online retailer TigerDirect.

Gateway sells a line of low-end to medium-sized PC servers. These servers are manufactured by what was Advanced Logic Research, a former pioneer in PC servers, which Gateway acquired.

Gateway's latest All-in-One computer, called the Gateway One, has been described thus: "The no-compromise elegant design, simplicity and expandability of Gateway's newest all-in-one PC brings sophistication to computer design, proving PCs don't have to be boxy and boring."[18]

Software

Gateway currently ships Microsoft Windows Vista as the operating system of choice for its computers, beginning on January 29, 2007, including Premium editions of Windows Vista. Gateway also sells computers without any pre-installed software upon request, but not through its Web site.[citation needed] On the computers that come with Microsoft Windows Vista, Gateway bundles a large quantity of various software. Some of which is Cyberlink Power 2 Go and the Gateway Game Console. Similar to Dell and HP, Gateway has been accused of shipping spyware.[citation needed]

Corporate affairs

Business model

Gateway directly and indirectly sells its products to third-party retailers, consumers, businesses, government agencies, and educational institutions.

According to the 2005 Annual Report,[19] Gateway has three major business segments: Direct, Professional, and Retail.

  • The Direct segment sells to consumers and small business customers using both the Internet and call centers.
  • The Professional segment sells to medium-to-large businesses, educational institutions (K-12 and higher education) and government agencies (federal, state and local) using telephone-based and field sales teams, complemented by local, regional, and national value added resellers and facilitated through customized Web sites.
  • The Retail segment sells products directly to retailers, such as consumer electronics stores, computer superstores, and warehouse clubs. eMachines branded PCs are sold exclusively through the retail channel.

According to the 2005 Annual Report, "The retail channel has become Gateway's largest distribution channel." Gateway used to run a retail chain of stores selling their products, however these were closed down in 2004.

Gateway competes mainly against Dell, Hewlett-Packard, Apple Inc., Lenovo, Sony, and Toshiba. In particular regions and outside the United States, Gateway competes with Fujitsu,[19] and along with its sister brands, Acer and Packard Bell.

Organization

A six-person Board of Directors ran Gateway prior to the acquisition by Acer. The former board included chairman Richard D. Snyder, former interim CEO, George Krauss, Douglas Lacey, Joseph Parham, Jr, Quincy Allen, David E. Russell, and Scott Galloway. Shareholders elect the board members at meetings, and those board members who do not get a majority of votes must submit a resignation to the board, which will subsequently choose whether or not to accept the resignation. The corporate structure and management of Gateway extends beyond the board of directors.

On September 7, 2006 the Board of Directors announced the appointment of J. Edward Coleman as chief executive officer. Coleman replaced Snyder, who served as interim CEO since February 2006, and was Chairman of the Gateway Board of Directors.[20]

On October 16, 2007 the acquisition by Acer became final and Gateway became a privately held company and a wholly-owned subsidiary of Acer. The board of directors resigned and a new board was appointed.

See also

References

  1. ^ Gateway closes AOL chapter with stock buyback - CNET News.com
  2. ^ Gateway sells business unit in $90 million deal - OC Business News - OCRegister.com
  3. ^ [1]
  4. ^ "Acer Inc. - Gateway, Inc.: Completion of Merger". Gateway. Retrieved 2007-10-22. {{cite web}}: Cite has empty unknown parameter: |1= (help)
  5. ^ Crockett, Roger O. "Gateway Loses the Folksy Shtick: CEO Waitt Looks West to Lure Sophisticated Talent". BusinessWeek. Retrieved 2009-02-10.
  6. ^ "Technology Briefing, Hardware: Gateway Plans Move". New York Times. Retrieved 2007-06-12. {{cite web}}: Cite has empty unknown parameter: |1= (help)
  7. ^ Freeman, Mike. "Gateway Inc. to leave Poway". San Diego Union-Tribune. Retrieved 2007-06-12.
  8. ^ "Amiga Inc and Hyperion Entertainment Locked in Legal Dispute". Amiga Flame. Retrieved 2007-08-28.
  9. ^ "Amiga Corp". Amiga History. Retrieved 2007-08-28.
  10. ^ "Gateway's plan to bring back Amiga". CNET Networks Inc. Retrieved 2007-08-28.
  11. ^ | Gateway Buys EMachines PC World, Jan 30, 2004
  12. ^ About Acer - News Release
  13. ^ Gateway News & Information
  14. ^ Gateway relaunches in Australia cnet Australia
  15. ^ Gateway.com — Notebooks and Laptops
  16. ^ Gateway.com — Desktops
  17. ^ Gateway.com — PC Monitors/Accessories
  18. ^ http://www.forbes.com/prnewswire/feeds/prnewswire/2007/09/27/prnewswire200709270930PR_NEWS_USPR_____LATH067.html
  19. ^ a b Gateway 2005 Annual Report
  20. ^ Michael Kanellos (2006-09-07). "Gateway gets a new CEO--again". CNET. Retrieved 2006-09-08.
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