Gateway Puts Cow Out to Pasture
For years, computer company Gateway Inc. has traded on the South Dakota roots of its founder and chief executive, Theodore W. Waitt.
The company’s brand -- either homespun or hayseed, depending on your view -- has been symbolized by a Holstein cow. The white boxes that the computers come in are covered with black cow spots. Gateway Country stores are stippled with cow spots. Waitt even appeared in television commercials with a bantering bovine.
Now, in a series of ads designed to bolster sales and give the company a more upscale image during the crucial holiday season, Waitt has killed the beloved cow.
“I’ve been calling it the de-prairiefication” of the company, Waitt said.
Why walk away from a powerful advertising symbol that once helped propel Gateway to the top of the home PC business?
Economically, money-losing Gateway had little choice but to seek a new image -- and business plan.
“The [PC] business can still be a great business,” Waitt said, “but the days of double-digit PC unit growth in the 10% to 20% range are gone.”
About 60% of U.S. homes have PCs, and the opportunity for growth is less than in the commercial sector. In addition, the consumer PC market is more volatile, closely linked to consumer confidence, which hit a nine-year low this week. Last year, for the first time since 1985, PC sales fell. Gateway PC sales peaked at 5 million in 2000 but dropped to 3.5 million last year and 2 million so far this year, according to the company.
As a result, Gateway has lost $228 million through the first nine months of this year, with sales of $3.1 billion, down 37% from a year earlier.
The market for digital devices -- such as Gateway’s 42-inch plasma-screen TVs, MP3 music players, digital cameras and video recorders of the type shown in one commercial -- is still experiencing double-digit growth and profit margins. When Waitt decided his company would begin selling high-tech toys, he knew the cow wasn’t going to cut it.
“We did a lot of research when we decided to expand into new product categories, and the research at that point showed people thought of us as a down-home, friendly PC manufacturer,” said the ponytailed Waitt. “We wanted to take the brand more upscale while not losing our heritage.”
