Gateway founder Waitt back in as chief executive
Published: 30 Jan 2001 09:18 GMT
Amid a sharp downturn in its PC business, Gateway said Monday that chief executive Jeffrey Weitzen has stepped down and will be replaced by the company's founder and chairman, Ted Waitt.
Weitzen replaced Waitt as chief executive on 1 January, 2000. However, Waitt has remained active in the San Diego-based company and owns about 100 million shares, or roughly one-third of the company's stock. "I love Gateway, and I'm going to do everything in my power to make sure the company can grow and prosper in this challenging environment," Waitt said in a statement.
The executive change comes amid an industrywide slowdown that has hit Gateway especially hard. Earlier this month, the company missed lowered earnings expectations and said it is laying off more than 10 percent of its work force.
Gateway spokesman John Spelich said Waitt's return is not an interim move. "He is the chief executive," Spelich said. "We are not looking for anyone to come in anytime soon."
Waitt is 38 years old -- Weitzen is 44. Weitzen, who is also resigning his seat on Gateway's board, joined the company in January 1998 as president and chief operating officer. Weitzen was previously an executive vice president at AT&T's business markets division.
"We have worked very hard over the past three years to transform Gateway in ways that would ensure its long-term success," Weitzen said in a statement. "I am proud of the work we've done and of all that we've achieved, and I am really looking forward to spending more time with my wife and family. I wish Ted and the entire Gateway family the best."
When Weitzen first came to Gateway, he was given responsibility for directing the company's sales, marketing, manufacturing, engineering and worldwide business operations.
At the time, the company was recovering from financial losses in the third quarter of 1997.
In particular, Weitzen placed particular emphasis on marketing and product bundling. He has been credited as one of the driving forces behind expanding the Country Store concept, which gave Gateway its own retail presence. The company was also one of the first major PC companies to begin to drive revenue from selling Internet access and for selling training, software and other peripherals through its YourWare program.
The crowning achievement of this process was a complex alliance with America Online signed in October 1999. Under the deal, AOL invested $800m (£544m) in Gateway, and the two companies embarked on an effort to develop new types of Internet appliances.
At the same time, Weitzen restructured management at Gateway, bringing in tenured corporate managers, analysts have said. He was also instrumental in moving company headquarters from South Dakota to San Diego to improve recruiting.
His exit comes amid sinking fortunes at Gateway, said Ashok Kumar, analyst at Piper Jaffray. Gateway has been hit especially hard because, like Apple, its business primarily lies in the consumer segment. It cannot balance consumer weakness with business PC sales. On Thanksgiving weekend, for instance, Gateway saw a 30 percent decline in sales from the same period the year before, the company has said.
"The question is, do they have a terminal disease?" Kumar asked. "The prognosis is not good, given their heavy dependence on the consumer market and on top of that the US market."
The company's beyond-the-box strategy to derive more revenue from services has not worked, he added. In 1997 and 1998, Gateway was often growing at double the market rate, according to studies from IDC and others. In recent quarters, Gateway's growth in PC shipments has been on par with or below the overall industry. Because of eroding prices, Gateway's profits have suffered.
IDC analyst Roger Kay said Gateway wasn't prepared for a downturn. "Gateway was well positioned for a boom in the consumer market. But when the consumer market tanked, they were in a poor position. I think Weitzen is taking the fall for that," Kay said.
"I think Ted Waitt noticed a big drop in his personal [share] value, and that got his attention, so he wanted to get back in management to try and turn that around."
Although Gateway's financial dilemma has been public knowledge, Kumar said, Weitzen's departure comes as a surprise. "Ted and Jeff had a pretty good relationship," Kumar said.
Joe Wilcox and Michael Kanellos contributed to this report.
Times are tough -- disappointing earnings announcements, layoffs, and plummeting stock prices are now all too familiar. After watching the company he co-founded stumble and founder, Ted Waitt is out to prove that that yes, you can go home again. In the ensuing shakeout -- Gateway will doubtless emerge as one of the survivors. The question Charles Cooper is asking is whether it will ever again be in any shape to challenge the big boys. Go to AnchorDesk UK for the news comment.
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