CASE STUDY 2
GATEWAY CHIEF MAKES DARING DECISIONS
Bill Gates, Michael Dell, and --- Ted Waitt? Like Gates and Dell, Waitt left college to form a computer company, Gateway. He and Mike Hammond, nor senior vice president of manufacturing, started the firm in a farmhouse with a loan secured by a $10,000 CD owned by Waitt’s grandmother. Initially, they sold hardware peripherals and software to owners of PCs made by Texas Instruments; later they expanded into designing and assembling their own configured PC systems for direct sale to consumers and businesses.
As his company grew, Waitt used his Midwestern roots to differentiate the South Dakota-based company from competitors such as Dell and Hewlett-Packard. For example, he used eye-catching cow spots to establish a brand image, which can be quite difficult in the standardized computer industry. Every gateway computer came packed inside a white box with cow-like spots, and the computer served cow-shaped cookies at its annual shareholder meetings. By 1998, the company was reporting net income of $346 million on $7.5 billion in annual revenues.
However, to sustain the company’s extraordinary growth during the coming years, Waitt realized that changes were needed. First, he decided to relocate the top management team to new administrative headquarters in San Diego. Not only would this help Gateway attract top talent, it would bring the office closer to Silicon Valley partners and suppliers. Waitt also decided to reduce the company’s reliance on the cow motif as he courted business customers, who might not see a clear connection between high-quality computers and cows. Gateway’s growth soared on and by 2000, the company had a workforce of 20,000, mainly concentrated in its U.S. manufacturing facilities.
Next, Waitt made an even more expensive change. Instead of taking orders only by telephone or via the Web, as rival Dell does, Waitt plunged into retailing. He opened hundreds of Gateway Country...