Economics & Research Blog
Road Warrior: Acer Buys Gateway; Forced to Use Windows by Court Order
Acer Computer recently bought Gateway.
By Dr. Joe Webb
Published: September 5, 2007
Acer Computer recently bought Gateway. (Other articles are here and here). I could write about how Acer has found a way to muddle through the personal computing business and is even loading Linux on some of its products. But no, I'd rather explain how much I miss Gateway, and its prior incarnation as Gateway 2000, and how it was ruined by vulture capitalists and the company's management. Its Wikipedia entry tells some of the story, but the fuller story is that a small start-up company created a strong differentiated market position against its competitors, held onto it, nurtured it, and then abandoned it once it smelled the money from its rich IPO. Big company consultants came in and did their best to turn it into a... big company. Gone were the endearing ads of cows in the background and computers in the foreground, surrounded by company executives in costume dress for the theme of the ad. We knew Ted Waitt, CEO. Not personally, but we knew him and others at Gateway because their ads were incredibly anti-establishment, ads by the little guy, ads by geeks in flyover country. There was even a time at Apple's low point where Gateway and Apple were touted as a good merger. It would have worked; both had near-fanatical followings of loyal cult-like customers. Gateway was one of the companies seeking to make computers with the Apple OS (scanner-maker Umax would eventually be one of those companies; rumor has it that Gateway got a "call" from Redmond in the process, but we'll never know; it's one of those things from the Gilbert Amelio at Apple days that no one mentions any more). Gateway and Apple were computers for people out of the computing mainstream. At a time when the market was being boringly Dell'd, there was Gateway, where Midwestern cows offered a stark contrast to Silicon Valley and Austin, Texas.
After the IPO and their preoccupation with getting ads on TV and “bigging up” the company, they made their ill-fated attempt to open Gateway stores, which failed. It was interesting that Apple could pull it off: Apple stores are counterculture, selling its own proprietary goods, and is staffed by people who love them. Gateway stores were filled with other people's stuff, and with Gateway just assembled them into boxes, and was staffed with disinterested retail clerks, despite the farm-like decor. If you wanted to order a computer that required any special configuration, their big service was letting you call their 800 number from the store. After all, “the 800 sales folks knew better what to order than we do,” I was told.
And of course, after I ordered the computer, it came with parts missing. Oh, the manuals for the parts were there, but not the parts. I sent it back, and they made me pay the shipping.
Many months later, one of those big multinational consulting firms came in and decided to see what they could do to fix Gateway. So they sent a letter to people who had problems, offering a $100 discount on a new Gateway computer to come back. They even called me. I asked them if they were kidding or not. I was out $100 for the shipping to return the defective unit. Send me the $100 and I'll think about it, I told them. The asked a few more questions, and it was clear that nothing would come of it. They seemed confused when I rejected $100 off a new computer. By then, we had started to assemble our own computers in the Webb house, and we had the manuals AND the parts, together, and they actually worked.
Whatever's left has now been purchased by Acer. Gateway was merged with eMachines not long ago. In the end, the story of Gateway was that the purpose of the company changed from selling computers to people who loved computing just like they did, and became, instead, a way to cash the owners out with a big IPO. If the owners lost interest in the business, they could have just hired others to run it for them years before. Instead, they ran it into the ground, with the help of “big-B-school and consulting firm suits” and piddled away their hard-earned customer loyalty with it.
It would have been interesting to see what would have happened had the original Gateway survived. They played around with handheld computing before it was popular, and they'd probably be fooling around with the Linux geeks today. The cows aren't talking any more; the suits and the consultants milked them dry.
Speaking of Linux, a person recently released from jail and now serving in home confinement has been ordered by the court to use Windows on his PC. Supposedly, our constitution says “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” The reason for the cruel and unusual punishment is that he has to run software that monitors where he goes online because his crime was to do a bootleg download of a Star Wars movie (well, that's at least the one that they caught him doing; he was quite good at the process). He uses Ubuntu Linux, and the monitoring software won't work in that. He's actually trying to raise money to buy a copy of Windows XP or Vista. Since he's got two felony convictions, he claims to be unemployable, and therefore needs the money.
Gosh, he should move to Rhode Island. The former mayor of Providence has already found work, despite his recent felony convictions.