Q&A With Gateway Computer Chairman and CEO Ted Waitt

Like Steve Jobs at Apple, Gateway chairman and CEO Ted Waitt returned to a company that he thought he had left in good hands to save. (The same is true of Jack Messman of Novell, also profiled in this feature.)

But since returning to Gateway four years ago, Waitt has completely revamped the company's management team, product portfolio and strategic focus. While praised for his bold style and inventive ideas, the financial picture at Gateway remains bleak. One of his many responses: Leverage third-party allies. In addition to his company's foray into consumer electronics (CE), Gateway's push into the mainstream channel is the most remarkable shift at the company since Waitt returned. Half of the company's sales in the SMB arena could go through allies. Below, Waitt explains why.

VB: If you go to 50 percent SMB revenue through the channel, you're bound to lose some influence over what customers think of your company. Are you comfortable with that?
Waitt: If our relationship with a customer moves them to a VAR, we're comfortable with it because you can't do everything yourself.

VB: You say you know you can't be all things to all people, but it seems like you're trying to do just that. What's your outlook for five years from now?
Waitt: Five years from now we want to have a meaningful impact on consumers' lives and on the businesses, educational and other institutions we do business with. A meaningful impact on the way they live their lives and entertain and educate themselves, and with how they run their businesses and communicate with customers and increase productivity levels.

VB: One of the reasons to get into the CE space is margins. What does the margin picture look like if that market becomes more competitive?

Waitt: Clearly, the margin structure is going to change. We showed a slide at our analyst meeting in May that showed a huge amount of room there today based on the inefficiencies of the older distribution structures. Now you have Dell coming in. But Dell doesn't have the retail structure [we do], and they're not going to innovate or have differentiated products. They're really just doing me-too products, but they'll do it very efficiently.VB: And you?
Waitt: We'll outpace them in innovation and on the high-end customer touch with our retail footprint and be significantly different that way. CE businesspeople already are starting to write the last chapter as if it's over, like in the PC business when we started coming up in the late-'80s and had a good run until things sorted themselves out. Even if things are happening faster now than then, it still takes time for that trend to play out regardless. CE margins continue to be higher than in the PC world because they don't have two companies like Microsoft and Intel that control innovation.

VB: Have you decided on certain things that you won't be?

Waitt: We're definitely not doing a PDA [in 2003]. We pulled the plug because it was a me-too product without a lot of opportunity to differentiate, so we went back to the drawing board. Until we can have a differentiated product with unique services offerings and integration capabilities, we won't play. We've also gone back and forth on the low-end PC. We're not out to be the biggest player out there; we just want to satisfy our customers.

Vital Stats

Age: 40
Year Joined Company: 1985 (co-founder)
Education: Attended University of Iowa

Outside Board Seats: None
Previous Corporate Positions: None
2003 Compensation: N/A $2,946 in '02