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Waitt, Ted - Overview, Personal Life, Career Details, Social and Economic Impact, Chronology: Ted Waitt

gateway company waitt’s computer

(1963-)
Gateway, Inc.

Overview

As CEO and cofounder of Gateway, Theodore W. Waitt heads one of the most successful computer manufacturers and sellers in the world, with annual revenues topping $5 billion. Gateway is the second-largest computer mail-order house in the world, and has a growing presence in conventional store retailing. Waitt is well known for his “work should be fun” philosophy and his fanciful marketing as he is for his business acumen.

Personal Life

Waitt was born in 1963 and grew up in Iowa. He attended the University of Iowa but dropped out in 1984 at the age of 22 to sell computers at Radio Shack. There he became friends with Mike Hammond, who, along with Waitt, would eventually create Gateway 2000. Waitt is married and has two children.

Waitt’s style is casual. He wears denim and boots instead of suits, has a ponytail, and listens to the blues or cowboy music. This puts him at odds with the rest of the computer industry, which is known as being conservative in both attitude and dress. But it is reflective of his Midwestern roots and the four-generation family cattle business he elected not to follow. Although he pursued computers rather than ranching, Waitt’s cattle background is evidenced in the company’s marketing as well as his dress. Gateway shipping boxes all have distinctive cow spots, as do many of the walls of Gateway offices. Cow cookies are served at annual shareholder meetings, and the corporate web site offers a number of Holstein facts. In a Gateway television ad, Waitt once portrayed a janitor. One departure from the rural theme, however, is the luxurious house he bought in July 1997. Waitt paid $14.4 million for a 16,000-square-foot mansion with a pool and tennis courts outside San Diego.

Career Details

Waitt and Hammond started Gateway 2000 in 1985 with a $10,000 bank loan secured by money held by Waitt’s grandmother. The idea was to sell computers directly over the phone and through mail order, thus cutting out the middlemen and keeping costs to a minimum. The company was originally housed in a barn on the Waitt family farm in Sioux City, Iowa. In the beginning, they sold computer hardware peripherals and software to people who owned Texas Instruments personal computers, initially placing ads in computer-oriented publications. In the first four months, Gateway sales topped $100,000.

Waitt’s older brother, Norman, joined Gateway in 1986; he was brought on board to handle the company finances. The next year, Waitt realized there was a market for completely configured personal computers, and the company began to meet that higher-end demand. The results were meteoric, even in the fast-growth, high-profit computer business. Company revenues in 1987 were $1.5 million, and in 1988, they were $12 million. By 1996, Gateway’s sales topped $5 billion, just shy of the $5.3 billion earned that year by Dell, the company that pioneered the concept of direct sales of computers and Gateway’s long-standing rival. By 1997 Gateway sales had jumped to $6.3 billion, though still behind Dell.

Gateway went public in 1993 at $15 a share. Waitt’s 50 percent ownership placed his stake at $870 million, securing him a place on the Forbes 400 list of wealthy people. That year, the company also had one of the highest profit margins in the computer industry. When the company’s stock doubled in 1997, Waitt’s net worth, based on his 71.1 million shares of Gateway stock, grew to almost $3 billion.

During those years, Gateway corporate headquarters were moved from Iowa to North Sioux City, South Dakota, and plants were built in Ireland and Malaysia. In 1997, a $28 million site was opened in Hampton, Virginia, employing over 1,000 people. The company also shortened its name to Gateway, Inc. as part of an image makeover as it vied market leadership.

Through the office in Dublin, Ireland, Gateway sells to France, Germany, and the United Kingdom. The company also does business in Japan via resellers. Locating the company in these places has enabled Waitt to offer good work for slightly lower wages and overhead, increasing the company’s profits. By 1991, Waitt’s brother, Norman, had left the business, though he still retained his significant holdings in Gateway stock. Waitt’s original partner, Hammond, has remained with the company, overseeing factory outlets.

Gateway’s success has not gone unnoticed by its competitors, and there has been at least one attempt at a buyout. Compaq, a top PC manufacturer, attempted a $7 billion merger with Gateway in 1997, but the deal fell through.

That same year, Gateway moved from the volatile, technology-heavy NASDAQ exchange to the New York Stock Exchange, offering stockholders a more stable trading environment. On that day, in keeping with his image, Waitt lead a Holstein cow around the trading floor and began the day’s business by ringing a cow bell.

As Gateway’s leader, Waitt embraced a corporate philosophy that the work environment should be a place where employees can grow but can also have fun. Company work stations are ergonomically designed; casual clothes are the rule rather than the exception, and popular music is played in the work areas. Employees participate in brainstorming sessions to come up with new working procedures or ideas, encouraging a team approach rather than a competitive atmosphere.

However, some analysts believed that Gateway’s relaxed image limited its sales potential, especially in the important corporate market, which Gateway was aggressively courting. In response to such criticism, the company undertook an effort in the late 1990s to impart a more serious corporate identity. While the Holstein spots and often irreverent company ads have gained Gateway instant recognition within the crowded, highly competitive computer industry, Gateway risked not being taken as seriously as its more staid rivals.

In a controversial move, Waitt moved the corporate headquarters to San Diego, where he believed he could attract more highly skilled workers than he could in North Dakota. Waitt and his management team also began a campaign to expand the company’s retail presence through its computer stores, targeting high-end users and small businesses. Waitt said these moves were part of a strategy to boost corporate sales to $25 billion by 2001.

Social and Economic Impact

Gateway is one of only a few companies selling computers primarily via direct marketing. This approach does away with middlemen and mark-ups; it also allows users to customize their orders, which are assembled on demand rather than in advance. Though it lags behind rivals like IBM, Dell, and Compaq, Gateway under Waitt’s leadership has carved out a major presence in the computer manufacturing and retailing business, creating in the process one of the most recognizable brand images in the business.

Chronology: Ted Waitt

1963: Born.

1984: Took sales position at Radio Shack.

1985: Cofounded Gateway 2000.

1993: Gateway went public.

1997: Opened east coast Gateway plant, Hampton, VA.

1998: Announced headquarters move to San Diego.

Waitt’s minority ownership in Gateway, at 44 percent of its stock, has also made him one of the wealthiest men in the United States. In addition to his $850,000 annual salary in 1998, the year he turned 35, Waitt’s share of the company was worth more than $3 billion.

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