Gateway 2000, and Sioux City

Theophile Bruguier was a fur trader who moved south out of Monreal after a stint as an attorney in Quebec before his fiancé died. He became friends with Chief War Eagle of the Yankton Sioux. We call him Chief, but he left the Santee rather than have a bloody fight over who would be the next chief. The Santee were being pushed down from the Great Lakes area of Minnesota and Wisconsin by the growing Ojibwe and were pushing further and further south. There are two main divisions of the Sioux people: the Dakota and the Lakota. There are two main ethnic groups of the Dakota, the Eastern, sometimes called the Santee and the Western, or the Yankton. After the issues with the his native Santee, he was welcomed by the Yankton, where he had two wives and seven children.  Chief War Eagle then spent time with the white people moving into the area in greater and greater numbers. They even went to war and he acted as a messenger for them in the War of 1812 and then became a messenger for the American Fur Company and a guide along the Missouri. After the war, he was elected a chief and helped negotiate peace treaties. He married two of his daughters off to Theophile Bruguier, who he sailed the Missouri with on trips between St Louis and Fort Pierre in the Dakota territory.  The place where Theophile settled was where the Big Sioux and Missouri rivers meet. Two water ways for trade made his cabin a perfect place to trade, and the chief died a couple of years later and was buried in what we now call War Eagle Park, a beautiful hike above Sioux City. His city. Around the same time, the Sioux throughout the Minnesota River were moved to South Dakota to live on reservations, having lost their lands and war broke out in the 1860s.  Back at the Bruguier land, more French moved into the area after Bruguier opened a trading post and was one of the 17 white people that voted in the first Woodbury County election, once Wahkaw County was changed to Woodbury to honor Levi Woodbury, a former Supreme Court Justice.  Bruguier sold some of his land to Joseph Leonais in 1852. He sold it to a land surveyor, Dr. John Cook, who founded Sioux City in 1854. By 1860, with the westward expansion of the US, the population had already risen to 400. Steamboats, railroads, livestock yards, and by 1880 they were over 7,000 souls, growing to 6 times that by the time Bruguier died in 1896. Seemingly more comfortable with those of the First Nations, his body is interred with Chief War Eagle and his first two wives on the bluffs overlooking Sioux City, totally unrecognizable by then. The goods this new industry brought had to cross the rivers. Before there were bridges to cross the sometimes angry rivers, ranchers had to ferry cattle across. Sometimes cattle fell off the barges and once they were moving, they couldn’t stop for a single head of cattle. Ted Waitt’s ancestors rescued cattle and sold them, eventually homesteading their own ranch. And that ranch is where Ted started Gateway Computers in 1985 with his friend Mike Hammond.  Michael Dell started Dell computers in 1984 and grew the company on the backs of a strong mail order business. He went from selling repair services and upgrades to selling full systems. He wasn’t the only one to build a company based on a mail and phone order business model in the 1980s and 1990s. Before the internet that was the most modern way to transact business.  Ted Waitt went to the University of Iowa in Iowa City a couple of years before Michael Dell went to the University of Texas. He started out in marketing and then spent a couple of years working for a reseller and repair store in Des Moines before he decided to start his own company. Gateway began life in 1985 as the Texas Instruments PC Network, or TIPC Network for short. They sold stuff for Texas Instruments computers like modems, printers, and other peripherals. The TI-99/4A had been released in 1979 and was discontinued a year before. It was a niche hobbyist market even by then, but the Texas Instruments Personal Computer had shipped in 1983 and came with an 8088 CPU. It was similar to an IBM PC and came with a DOS. But Texas Instruments wasn’t a clone maker and the machines weren’t fully Personal Computer compatible. Instead, there were differences.  They found some success and made more than $100,000 in just a few months, so brought in Tedd’s brother Norm. Compaq, Dell, and a bunch of other companies were springing up to build computers. Anyone who had sold parts for an 8088 and used DOS on it knew how to build a computer. And after a few years of supplying parts, they had a good idea how to find inexpensive components to build their own computers. They could rescue parts and sell them to meatpacking plants as full-blown computers. They just needed some Intel chips, some boards, which were pretty common by then, some RAM, which was dirt cheap due to a number of foreign companies dumping RAM into the US market. They built some computers and got up to $1 million in revenue in 1986. Then they became an IBM-compatible personal computer when they found the right mix of parts. It was close to what Texas Instruments sold, but came with a color monitor and two floppy disk drives, which were important in that era before all the computers came with spinning hard drives. Their first computer sold for just under $2,000, which made it half what a Texas Instruments computer cost. They found the same thing that Dell had found: the R&D and marketing overhead at big companies meant they could be more cost-competitive. They couldn’t call the computers a TIPC Network though. Sioux City, Iowa became the Gateway to the Dakotas, and beyond, so they changed their name to Gateway 2000.  Gateway 2000 then released an 80286, which we lovingly called the 286, in 1988 and finally left the ranch to move into the city. They also put Waitt’s marketing classes to use and slapped a photo of the cows from the ranch in a magazine that said “Computers from Iowa?” and one of the better tactics for long-term loyalty, they gave cash bonuses to employees based on their profits. Within a year, they jumped to $12 million in sales. Then $70 million in 1989, and moved to South Dakota in 1990 to avoid paying state income tax. The cow turned out to be popular, so they kept Holstein cows in their ads and even added them to the box. Everyone knew what those Gateway boxes looked like. Like Dell, they hired great tech support who seemed to love their jobs at Gateway and would help with any problems people found. They brought in the adults in 1990. Executives from big firms. They had been the first to Mae color monitors standard and now, with the release of Windows they became the first big computer seller to standardize on the platform.  They released a notebook computer in 1992. The HandBook was their first computer that didn’t do well. It could have been the timing, but in the midst of a recession in a time when most households were getting computers, a low cost computer sold well and sales hit $1 billion. Yet they had trouble scaling to their ship hundreds of computers a day. They opened an office in Ireland and ramped up sales overseas. Then they went public in 1993, raising $150 million. The Wiatt’s hung on to 85% of the company and used the capital raised in the IPO to branch into other areas to complete the Gateway offering: modems, networking equipment, printers, and more support representatives.  Sales in 1994 hit $2.7 billion a year. They added another support center a few hours down the Missouri River in Kansas City. They opened showrooms. They added a manufacturing plant in Malaysia. They bought Osborne Computer. They opened showrooms and by 1996 Gateway spent tens of millions a year in advertising. The ads worked and they became a household name. They became a top ten company in computing with $5 billion in sales. Dell was the only direct personal computer supplier who was bigger.  They opened a new sales channel: the World Wide Web. Many still called after they looked up prices at first but by 1997 they did hundreds of millions in sales on the web. By then, Ethernet had become the standard network protocol so they introduced the E-Series, which came with networks. They bought Advanced Logic Research to expand into servers. They launched a dialup provider called gateway.net.  By the late 1990s, the ocean of companies who sold personal computers was red. Anyone could head down to the local shop, buy some parts, and build their own personal computer. Dell, HP, Compaq, and others dropped their prices and Gateway was left needing a new approach. Three years before Apple opened their first store, Gateway launched Gateway Country, retail stores that sold the computer, the dialup service, and they went big fast, launching 58 stores in 26 states in a short period of time. With 2000 right around the corner, they also changed their name to Gateway, Inc. Price pressure continued to hammer away at them and they couldn’t find talent so they moved to San Diego.  1999 proved a pivotal year for many in technology. The run-up to the dot com bubble meant new web properties popped up constantly. AOL had more capital than they could spend and invested heavily into Gateway to take over the ISP business, which had grown to over half a million subscribers. They threw in free Internet access with the computers, opened more channels into different sectors, and expanded the retail stores to over 200. Some thought Waitt needed to let go and let someone with more executive experience come in. So long-time AT&T exec Jeff Weitzen, who had joined the company in 1998 took over as CEO. By then Waitt was worth billions and it made sense that maybe he could go run a cattle ranch. By then his former partner Mike Hammond had a little business fixing up cars so why not explore something new.  Waitt stayed on as chairman as Weitzen reorganized the company. But the prices of computers continued to fall. To keep up, Gateway released the Astro computer in 2000. This was an affordable, small desktop that had a built-in monitor, CPU, and speakers. It ran a 400 MHz Intel Celeron, had a CD-ROM, and a 4.3 GB hard drive, with 64 Megabytes of memory, a floppy, a modem, Windows 98 Second Edition, Norton Anti-Virus, USB ports, and the Microsoft Works Suite. All this came in at $799. Gateway had led the market with Windows and other firsts they jumped on board with. They had been aggressive. The first iMac had been released in 1998 and this seemed like they were following that with a cheaper computer. Gateway Country stores grew over 400+ stores. But the margins had gotten razor thin. That meant profits were down. Waitt came back to run the company, the US Securities and Exchange Commission filed charges for fraud against Weitzen, the former controller, and the former CFO, and that raged on for years. In that time, Gateway got into TVs, cameras, MP3 players, and in 2004 acquired eMachines, a rapidly growing economy PC manufacturer. Their CEO, Wayne Inouye then came in to run Gateway. He had been an executive at The Good Guys! and Best Buy before taking the helm of eMachines in 2001, helping them open sales channels in retail stores. But Gateway didn’t get as much a foothold in retail. That laptop failure from the 1980s stuck with Gateway. They never managed to ship a game-changing laptop. Then the market started to shift to laptops. Other companies left on that market but Gateway never seemed able to ship the right device. They instead branched into consumer electronics. The dot com bubble burst and they never recovered. The financial woes with the SEC hurt trust in the brand. The outsourcing hurt the trust in the brand. The acquisition of a budget manufacturer hurt the brand. Apple managed to open retail stores to great success, while preserving relationships with big box retailers. But Gateway lost that route to market when they opened their own stores. Then Acer acquired Gateway in 2007. They can now be found at Walmart, having been relaunched as a budget brand of Acer, a company who the big American firms once outsourced to, but who now stands on their own two feed as a maker of personal computers.