Book Laboratory Inc Staff Inc The Book Laboratory

Gateway, Inc., formerly Gateway 2000, Inc., began in 1985 as TIPC Network, founded by Ted Waitt and Mike Hammond. Initially operating from a cattle farm in Iowa, the company started by reselling computer parts and later began assembling and selling its own PC-compatible systems through mail-order. Ted Waitt's vision focused on offering mid-range systems at competitive prices, leveraging a remote sales force and catalog to minimize overhead. The company gained recognition for its distinctive cow-spotted packaging and its "Computers from Iowa" marketing campaign.

Gateway experienced significant growth, moving its headquarters to South Dakota to benefit from tax advantages and expanding its product line and marketing efforts. By the early 1990s, it had become a major player in the mail-order computer market, even expanding into corporate sales and international markets. Despite facing challenges like quality control issues and increased competition, Gateway continued to evolve. The company was eventually acquired by Acer in October 2007 for $710 million, following a period of market consolidation and restructuring.

Gateway, Inc. was established in September 1985 as TIPC Network by Ted Waitt and Mike Hammond, with Ted Waitt as the primary founder. Before starting the company, Waitt had experience working in a computer store after dropping out of college. He envisioned a business that would cater to customers needing personal computers that fell between the basic and high-end market segments, offering systems that were neither too limited nor excessively expensive. Waitt also recognized the potential for remote sales, believing that educated salespeople could effectively sell computers over the phone, thereby reducing overhead costs. The initial capital for the venture came from a $10,000 loan from Waitt's grandmother. Operating initially from the upper floor of his father's cattle brokerage, the company's first products were software and peripherals for the Texas Instruments Professional Computer, which was largely considered obsolete at the time. To generate early capital, TIPC Network charged customers a $20 membership fee. The company achieved early success, generating up to $100,000 in sales within its first four months, largely due to its low-cost products in the TIPC aftermarket.

In early 1986, Norman Waitt, Ted's brother, joined the company as a financial advisor, receiving half ownership. That year, the company began selling its own hand-assembled computers locally. By the end of 1986, the company rebranded as Gateway 2000, Inc., and achieved $1 million in revenue, with the complete computer systems contributing a small portion to this figure. Inspired by a Texas Instruments rebate program in mid-1987, Gateway 2000 began producing PC-compatible systems. They released a mail-order system featuring dual floppy drives, ample RAM, a color monitor, and a keyboard for $1,995, which proved successful. Revenue climbed from $1.5 million in 1987 to $12 million in 1988. The company's early computers were assembled from parts sourced from other mail-order companies, with Waitt's intuition guiding product development rather than formal engineering. This strategy, combined with a focus on price-sensitive customers who required minimal technical support, allowed Gateway 2000 to maintain low overhead and competitive pricing. In 1988, the company moved its headquarters to Sioux City, Iowa, and launched its first major advertising campaign emphasizing its low costs and Midwestern origins, famously using the "Computers from Iowa" tagline and cow-themed imagery.

In January 1990, Gateway 2000 relocated its headquarters to North Sioux City, South Dakota, to take advantage of the state's lack of income tax. The company expanded its advertising, featuring employees in pastoral settings and adopting the iconic cow-spotted design for its shipping containers, symbolizing its Midwestern roots. By the end of 1990, revenues reached $275 million. To manage growth, the company recruited external financial expertise and hired executives from rival firms, establishing various divisions for marketing, new technologies, and product development. In 1991, a new manufacturing plant was constructed, increasing production capacity. Gateway 2000 also expanded its sales channels to include fleet sales to enterprises, offering enhanced support and training for corporate clients. To project an image of legitimacy, the company began releasing quarterly financial results. Despite efforts to innovate, Gateway 2000 acknowledged falling behind competitors and began segmenting its marketing to target specific customer needs, introducing products like the AnyKey keyboard and the HandBook subnotebook. By the end of 1992, the company reported $1.1 billion in sales and had become the leading mail-order computer business in the United States, successfully navigating a price war.

“Computers from Iowa with a question mark. Like, who would expect computers from Iowa? You just don't expect it...And it struck a chord in a time when people were, you know, doing a lot of things different in the industry. You know, so that was the original cow ad.”

“The cow spot was actually developed by a graphic designer. I can't take a claim for that. All I can take claim for it, when I saw it on a box, I said, that is amazing... it was kind of that, no matter where Gateway went, around the world, we took the cow spots. And it was taking that, you know, Iowa values, those Midwestern values with us wherever. It was our symbol.”