Gateway Chairman Resigns From PC Company He Created

Ted Waitt is leaving the barn.

More than two decades after the once-ponytailed entrepreneur launched Gateway Inc. in his grandmother’s Iowa farmhouse, Waitt on Thursday resigned as chairman of the folksy personal computer maker that reflected the rise and fall of the technology industry.

Waitt, who surrendered most of the day-to-day operation of the Irvine-based company after its 2003 acquisition of EMachines Inc. said he planned to pursue investment and philanthropic activities.

Board member and former Gateway President Richard Snyder will succeed Waitt as chairman. Wayne Inouye will remain chief executive. Waitt, 42, is still Gateway’s largest shareholder, with a 28% stake.

During Waitt’s tenure Gateway opened -- and then shut -- nearly 200 retail stores around the country and slipped from being a profitable, competitive player in the PC business to a money-losing also-ran. Under Inouye, the company has laid off thousands of people and shored up its finances.

“It was a great ride,” Waitt said, “a great 20 years.”

Waitt started Gateway in 1984. The company’s signature black-and-white cow-spot boxes reflected its farmhouse heritage, and Gateway ads emphasized customer service and a knowledgeable, friendly staff.

Waitt later moved the company to Southern California, setting up headquarters in Poway, near San Diego. It moved to Irvine last year.

“Ted Waitt had the vision to see the business opportunity that the PC market presented,” said Charles Smulders, a computer analyst at technology market researcher Gartner Inc. “He rapidly grew the company to become a major force in the PC business.”

Waitt left the company in 1999 but returned a year later after financial difficulties under Waitt’s successor, Jeffrey Weitzen. Weitzen and two other Gateway executives were later accused by the Securities and Exchange Commission of manipulating financial results.

“His major error was passing the reins of the company to Jeff Weitzen in the late 1990s,” Smulders said.

“Weitzen put greater focus on selling services and in doing so lost focus on its primary business of selling hardware. Gateway as a single entity never really recovered.”

Severe competition from Hewlett-Packard Co. and Dell Inc. put relentless pricing pressure on the entire industry.

In January 2004, Waitt announced that Gateway would acquire EMachines, and Inouye, then EMachines’ chief executive, became Gateway’s CEO in March 2004. The company was awash in red ink, losing market share and burning through nearly $3 million in cash each month.

Around the time of the merger, Waitt cut off the ponytail.

Inouye closed all the retail stores and eliminated around 5,500 jobs, about 74% of Gateway’s payroll.

Gateway lost $475 million on revenue of $3.6 billion last year, but executives say it will turn a profit this year for the first time since 2001. It had $583.8 million in cash at the end of March.

Gateway shares have fallen from about $80 in late 1999 to $3.23 on Thursday on the New York Stock Exchange.

Waitt said he had been spending time with his investment firm, Avalon Capital Group, managing technology, healthcare and real estate. He has also been working with the Waitt Family Foundation and Founding Fathers, a group that tackles violence in families and communities.

Another project Waitt is pursuing is with National Geographic, tracing the origins of mankind by taking 100,000 DNA samples around the world to track human migration over the last 60,000 years.

He brushed aside a question of whether he might return to the company once again.

“I have a hard time envisioning that,” he said.