Fortune Magazine
Fast Forward

Gateway wasn't fabled, but I'll miss it

Swashbuckling Ted Waitt's once-feisty PC mail-order house now disappears into the maw of globalization. Such is tech today, reports Fortune's David Kirkpatrick.

By David Kirkpatrick, Fortune senior editor

NEW YORK (Fortune) -- Gateway is gone. Now a Taiwanese company passes a Chinese one to become the third largest PC-maker in the world, as Acer buys Gateway (Charts). It pushes aside Lenovo to follow behind only Dell (Charts, Fortune 500) and HP (Charts, Fortune 500). It's the passing of an era in tech, and yet another signpost of how global the tech industry has irrevocably become.

Those of us who've covered tech for a while once spent lots of time with Gateway and its personable, idiosyncratic founder Ted Waitt, who used to be spoken of in the same breath as Michael Dell (as Om Malik notes in a nice piece). The chain-smoking, thinning-ponytailed Waitt was a ubiquitous presence in the early days of PCs, when his Gateway, along with Dell, survived a brutal purge of the scores of tiny mail-order companies that once seemed to inhabit every mid-sized city in the Western U.S.

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Waitt tried several times to resurrect his baby as the industry changed and high-priced skills like design and classy marketing came to define the industry's winners. Price advantages that could only come with scale also aided his arch-rival Dell, which successfully targeted big business.

Meanwhile, Gateway never really escaped its roots as a consumer company, which becomes one of the reasons Acer wants it. That company, successful as it has been, has not gotten traction as a U.S. consumer brand. Gateway's many strategies constitute a mini-museum of PC ideas: Waitt was first with a PC-driven digital home entertainment center, but mistakenly thought he needed to bundle the large-screen TV with the PC. Should Gateway own its own stores? No. Yes. Oh yeah - no. But wait - consolidation is the answer! An ill-fated merger with eMachines didn't cut the mustard. Waitt himself left, came back, then left again. Along the way he also experimented with sharing power with a managerial veteran brought in from outside, but that too foundered, with the manager eventually leaving under a financial cloud.

This morning it was considered a huge win for shareholders when Gateway's stock rose to $1.80 in light of the acquisition news. Its peak back in the day - 1999 - had been an awesome $84. Om notes that there are now only three PC majors left in the U.S. And each, he points out, has a very particular niche: Dell specializes in big corporates (though HP is giving it a run for its money there as it surges); HP is the Windows-PC company that does digital media right (and increasingly, design, I would add); and Apple (Charts, Fortune 500) - Om says it's a cult thing, but let's face it - Apple does just about everything right. (I'm probably in the cult myself, but as I download albums to iTunes on my Mac while I write this and easily manipulate my AirPort wireless connection, it's hard to believe that other companies have survived at all.)

Taiwan-based Acer has been showing many signs of life lately globally, though it has never until now been a major factor in the U.S. market. But from its early days, led by the inimitable Stan Shih, who co-founded it as an electronics distributor in 1976 and was probably the most influential non-American in the PC industry during its first decades, Acer has had both vision and staying power. (Shih retired in 2004. I'm amazed while writing this to learn he doesn't have his own Wikipedia profile, but you can read about him here.)

Now Acer squeaks past Lenovo to be number three among global PC-makers. Lenovo, too, is doing many things right, led by American Dell-veteran Bill Amelio. The new Acer will have around $15 billion in worldwide sales, ship 20 million PCs a year, and would have commanded 10.8% in U.S. market share in the second quarter, according to IDC. Throughout its travails, and despite its fitful forays into stores, its managerial stumbles, its inability to keep pace with Dell, etc. etc. etc., Gateway was able to keep its quality high enough to retain a very respectable brand image in the U.S. Acer is getting something that has real value, and it's a coup for them that they can do so for a mere $710 million.

Gateway also announced Monday it would exercise its right to make the first bid for Packard Bell, a smaller brand that retains a big presence in Europe. The speculation is that Acer just wants to make Lenovo, which has been courting Packard Bell, pay a higher price.

It sounds like good politics. But in all, this deal says to me that in some ways the great era of U.S. dominance in tech has finally come to an end. Every company to succeed today has to be global, and it really doesn't matter much anymore where it is headquartered if it understands the exigencies of global branding and marketing. PCs themselves may not seem nearly so interesting as they used to be, but that could change as chipmaker Intel (Charts, Fortune 500) pushes its ultra-mobile strategy which is likely to confuse us whether that thing in our hand is a cellphone or a PC. (Read my columns about that here and here.) I suspect Acer will be one of the companies pushing us cleverly into the new world of mobility, as we all become more global citizens ourselves.  Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.