Gateway Reports Fourth Quarter and Full Year Results; Company Unveils Aggressive Steps to Enhance Growth and Profitability Including More Than 10 Percent Reduction in Workforce

Revenue and EPS Affected by Continued Slide in Consumer Demand and Increasing Pricing Pressures

SAN DIEGO, January 11, 2001 -- Gateway Inc. (NYSE: GTW) today reported fourth quarter 2000 and full-year results that were below recently revised expectations due to a continued deterioration of worldwide PC demand and increasing pricing pressure, both of which are expected to continue at least through the first half of this year.

In addition, Gateway today also unveiled a number of actions it is taking to better position the company for enhanced growth and profitability in the face of the current demand and macroeconomic realities.

"While Gateway's 2000 results were not as we had hoped, our core strategy of being a trusted guide for technology and of providing products and services in addition to the PC -- our beyond-the-box initiative -- is the right strategy and we will continue to execute against it," said Jeff Weitzen, Gateway president and chief executive officer. "For now, we need to prioritize our business initiatives against the present economic realities. Tough times call for tough decisions. We are confident the steps we are taking today will make us a stronger company as a result, which will benefit our employees, clients and shareholders."

In the fourth quarter, Gateway reported a loss of $94.3 million, or $0.29 per share, including a previously announced $187 million pre-tax charge to earnings related primarily to the write-down of the company's investments in technology-based companies and other assets, on revenues of $2.373 billion. Excluding the unusual charge, Gateway would have reported net income of $37.6 million, or $0.12 per share. By comparison, Gateway in the fourth quarter of 1999 reported a profit of $126 million, or $0.38 per diluted share, on revenues of $2.55 billion. Gateway's reported fourth quarter income and revenue were both below analyst estimates for the quarter, and were significantly lower than Gateway expected following a Nov. 29, 2000 news release.

Gateway's beyond-the-box sales of products and services other than the PC continued to be a bright spot in the fourth quarter, accounting for 24 percent of revenue and 100 percent of operating income.

"When we pre-announced on Nov. 29, we had expected some continued ramping of demand in December based on past experience, but that did not materialize," Weitzen said. "Softer sales have caused inventories of our competitors to swell, and have touched off an aggressive pricing environment that will have negative consequences for the PC sector for the next six months."

Among the steps Gateway announced today to better position the company for enhanced growth and profitability in the face of the current demand and macroeconomic realities are:

· Drive revenue growth by: reinvesting beyond-the-box profits into the brand to ensure Gateway products and services worldwide represent the best value in the market; increasing the company's beyond-the-box attach rates in every geography and market segment worldwide; and continuing rapid development of products and services to tap the coming convergence of broadband, content, communications and devices. · Improve profitability by streamlining manufacturing, consolidating vendors and driving productivity through SG&A reductions. · As a result of these actions and other restructuring steps, Gateway will reduce its worldwide employment ranks in the first quarter by more than 10 percent. As a result, Gateway will take a $50 million pre-tax charge in the first quarter of 2001.

In response to the continuing deterioration in consumer demand, Gateway has revised further its year 2001 expectations. In 2001, Gateway expects revenue growth of 3 percent and operating EPS growth of 6 percent over 2000 results, before the fourth quarter 2000 and first quarter 2001 charges, or $1.44 per diluted share, reflecting the expected continuation of the present economic environment through the first half and an expectation of improvement in the second half of the year.

Full Year 2000

Gateway reported full-year 2000 profits of $315.9 million on revenues of $9.7 billion, or $0.95 per diluted share, a 28 percent decrease from 1999. Excluding the previously announced charge, net income for 2000 was $448 million, or $1.36 per diluted share, a 3 percent increase over 1999. Full-year 2000 results were impacted by a sharp, unexpected and continuing reduction in consumer demand that began during the holiday period.

Conference Call

Gateway's year-end conference call, led by President and CEO Jeff Weitzen and Chief Financial Officer John Todd, will be accessible today via live audio webcast at 5:30 PM ET/2:30 PM PT at www.gateway.com.

About Gateway

Gateway (NYSE: GTW), a Fortune 250 company founded in 1985, focuses on building lifelong relationships with consumers and businesses through complete technology personalization. Gateway ranked number one in U.S. consumer PC revenue in 1999 (1) and was rated among the top ten best corporate reputations in America according to a survey conducted in August of 1999 by Harris Interactive and the Reputation Institute and published in The Wall Street Journal. In 1999, Gateway was seventh in total return to shareholders among Fortune 500 companies and tenth in total shareholder returns over the past five years. (2) Gateway employees worldwide provide clients with services and built-to-order computers that consistently win top awards from leading industry publications. Gateway had total global revenue of $9.7 billion in 2000. For more information, visit our Web site at www.gateway.com

(1) According to GartnerGroup/Dataquest US PC Quarterly statistics. (2) According to Fortune Magazine, April 17, 2000.

Special Note

The above statements include forward-looking statements based on current management expectations. Factors that could cause future results to differ from these expectations include the following: general economic conditions; growth in the personal computer industry; competitive factors and pricing pressures; component supply shortages; short product cycles; foreign currency fluctuations; risks relating to new or acquired businesses and joint ventures; risks of financing customer orders; infrastructure requirements; risks of equity investments; changes in product, customer or geographic sales mix; access to technology; and inventory risks due to shifts in market demand. Additional factors are described in the Company's reports and other filings filed with the Securities and Exchange Commission.

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