Ted Waitt, Chairman & CEO of Gateway

This is a partial transcript from Your World with Neil Cavuto, February 28, 2002. Click here for complete access to all of Neil Cavuto's CEO interviews.

NEIL CAVUTO, HOST: Gateway (GTW) investors having a cow over the latest developments. And I'm not talking the PC maker's famed moo-ing commercials. I'm talking Gateway's news that it won't return to profitability for at least another year.

I caught up with company boss Ted Waitt, who tried to put a good spin on the not so good news.


TED WAITT, CHAIRMAN & CEO, GATEWAY: Well, you know, we outlined it is possible for us to be profitable in the fourth quarter of this year. We thought it was best to be more conservative in our guidance yesterday.

What we really tried to communicate is we are on a path to long-term sustainable profitability and success in this industry. And we laid out a three-year plan. We laid out the worst-case scenario, which still shows us with approximately a billion dollars in cash at the end of three years. And then we laid out an upside scenario as well, which we are going to try and track to. So, you know, since we engaged our more aggressive pricing plan, we have seen serious momentum in our business and we feel pretty good about how we are tracking towards our long-term success.

CAVUTO: How much are those cow ads helping?

WAITT: The cow ads actually have driven a lot of traffic in the first quarter. Our store traffic is up. Our phone traffic is up. Our Web traffic has been up.

But, you know, cow ads are just one thing. You have you to be able to, you know, provide the best experience when somebody walks they into our stores, when they call us, it's all led to increases in traffic and increases in our sales conversion because we're just delivering great values with great people right now. As well as that, we have got, according to some surveys, the best support in the industry right now and that is helping.

CAVUTO: Well, the Dell (DELL) folks would dispute that and they would say that they have the better spokesperson in the Dell dude. Do you need a Dell dude, your type of Dell dude that's a human being, not a cow?

WAITT: We have got the cow. We have done a lot of research on...

CAVUTO: By the way, that...

WAITT: ... how people respond to it.

CAVUTO: Is that a bull or is that a cow in the ads?

WAITT: Well, you know, it is a steer because it has a male voice, so...

CAVUTO: Now, I do not want it to get too arcane here, but we get a lot of e-mails from people who say it's a female cow and a male voice.

WAITT: Well, that is a technical point. I like to think of it as a steer. You know, growing up in the cattle business, I know a lot about cattle. But at the same time, it is a talking cow. So if they have ever seen a talking cow, you know, other than in one of our ads or somewhere else on TV, I would like to know about it.

CAVUTO: Well, it's very clever.

WAITT: We have done a lot of research on it and people love the cow and they love what it is doing for us. It really speaks to a lot of our core values, and it is fun as well. But we have got some real sophisticated methods that we are, you know, having the cow to drive the brand-type umbrella. And then we've got some hard-hitting messages that are driving people into our stores and to our phone lines.

CAVUTO: Now, let me ask you about the stores here. Obviously you are going to continue this push, but, you know, maybe you would be better off, you know, direct selling these PCs. You've got ample competition from the Best Buys (BBY), from the Circuit Cities (CC) and the CompUSAs that all sell computers at cut-rate prices.

Is it worth it to you and is it confusing for you to have a retail outlet when you already have a very good direct-buy market?

WAITT: Well, I mean, we still have the direct model. I mean, we own these stores. The people in the stores work for us. That way we can control the experience not only with the person who is sold, but also from the support side. So at the same time we compete with Dell, we compete with, you know, the Circuit Cities and the CompUSAs and the Best Buys. You know, and we feel our people just do a tremendous job in those stores, talking to people about their technology needs. It is a tremendous advantage for us, and we are just going to execute on it over the long term. Half the people that buy a PC buy it at retail. We have got great values out there right now. And whether you want to go to our Web site or call us on the phone or go to our store, it is the customer's choice.

CAVUTO: Let me ask you about your stock now. It is barely trading at book value. It is pretty cheap at this level. Are you worried or, in fact, do you welcome takeover interests?

WAITT: I definitely don't welcome takeover interests.

CAVUTO: Have you had any?

WAITT: You know, I own a significant portion of the stock myself.


CAVUTO: Have you had any interests from others?

WAITT: I can't really comment on that.

CAVUTO: What about Dell? Have they talked to you?

WAITT: I can't really comment on any of those types of things. I mean, we are confidence in our ability to grow our business over the long term for sustainable profitability by providing great values and great service to our customers. And that is what we are going to do. And we showed a long-term plan. We like being an independent company. We do not need to merge or do anything different.

CAVUTO: But are you open to that, Ted? Would you be open, if someone said, look, you know, you have got a great product here. Your stock is pretty soft, though. This is a great time for us to buy you?

WAITT: Definitely not. I mean, we are always open to do what is best for our shareholders. I own a significant portion of the company. And I think what is best for our shareholders is for us to execute on the growth plans that we have put in place. We've spent a lot of time developing these plans. You know, we spent four hours communicating to analysts yesterday and it is harder to understand when we've spent the last, you know, 13 months developing these plans.

And we are engaged in executing them and executing them over the long- term. And that is what we feel is best for our shareholders. Again, Gateway is trading at or near book value. I mean, you don't get a chance to buy a company like Gateway, you know, at or near book value very often.


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