Gateway founder Waitt expected to drop CEO role

Gateway founder Ted Waitt is preparing to step down from his role as CEO of the PC maker, although he will retain his position as chairman.

Waitt, who founded the company noted for its eye-catching cowhide-designed boxes, is expected to make the transition by the end of the year, a source close to the situation told CNET News.com.

Jeffrey Weitzen, Gateway's current president and chief operating officer, will step into the CEO role. Weitzen joined the company in January 1998 as part of a major management realignment.

Weitzen, who previously was executive vice president of AT&T's business markets division, joined the company at a time when it was struggling to handle product transitions and was falling short of Wall Street's expectations.

Gateway declined to comment on the apparent transition.

Brad Shaw, a Gateway spokesman, said today that if Waitt does step down as CEO, it should be no surprise that Weitzen would be considered a "great candidate" for that role.

Analysts agree that Weitzen is capable of managing the company.

"What Ted has done that has been instrumental in the last year is assemble a top-notch management team," said Ashok Kumar, an analyst with US Bancorp Piper Jaffray.

"If Ted totally distanced himself from the company, the street would be uneasy," Kumar said. "But instead we'll have the best of both worlds."

Gateway at a glance

HQ: San Diego, Calif.   Chairman: Ted Waitt   President: Jeff Weitzen   Employees: 19,300   Annual sales: $7.5 billion   Annual income: $346 million   Date of IPO: Dec. 1993   Ticker: GTW   Exchange: NYSE More: Gateway quotes Gateway news Source: Bloomberg 12/2/99

Kumar said Waitt's strength has been his vision and strategic thinking, rather than handling the logistics of running a company.

As an example, Kumar cited Waitt's decision to open a chain of Gateway Country retail stores. Gateway pioneered the practice of selling directly to consumer via catalogs and the Net. Many on Wall Street had their reservations that opening physical stores made sense, but the stores have been Gateway's growth engine for the past 18 months, Kumar said.

Gateway shares were trading today at 73, down 1.75. Since the beginning of the year the shares have gained 185 percent.

The company's recent turnaround followed several missteps.

During the June quarter last year, the company posted earnings of 19 cents while analysts' consensus was 22 cents.

"During the second quarter last year, we went negative on the company early in the quarter, even though they kept insisting they were in line with the consensus," Kumar said.

And in the September 1997 quarter, the company underwent a major product transition hiccup, in which it posted a loss of 4 cents while Wall Street was expecting a profit of 6 cents.

Waitt, who tends to be frequent seller of Gateway stock, sold 1.5 million shares between October 25-29 with a value of $95 million. The shares were sold at prices ranging from 61.69 to 67.44 a share.

Last month, Waitt signaled in two separate filings his plans to sell another 3 million shares with a total value of $207 million, according to Disclosure, a research firm that tracks insider sales.

The sales, however, represent a small portion of his overall 41.2 percent stake in Gateway. Waitt owned 64.4 million shares as of March 1, according to the company's proxy. At today's price of 73, his stake is worth more than $4 billion.

News of Waitt's apparent relinquishing of the CEO title was first reported by financial magazine Fortune.