GETTING TO THE TOP THEIR WAY : COMPUTER COMPANY STAYS TRUE TO ROOTS.

Byline: Evan Ramstad Associated Press 

IBM opened a new division in Florida to create its first personal computer. Apple Computer opened a new building to build the Macintosh.

Gateway 2000 rented a two-bedroom duplex to create the first combination PC and big-screen TV.

With a basketball hoop in front, a trailer park down the street and a view of Gateway's huge cow-spotted plant across Interstate 29, this hardly seems the place where the most talked-about computer of the year would come.

But then this patch of prairie between the Sioux and Missouri rivers hardly seems the place for a company that will sell more than $4 billion worth of computers this year.

Gateway 2000 Inc. is one of two companies, along with Dell Computer Corp., to rise to the Fortune 500 out of the hundreds of hobbyist custom PC builders in the early 1980s.

Both sell directly to customers, usually over the telephone, rather than through stores or wholesalers. Both continue to grow faster than the overall PC industry, helped by the growing base of sophisticated PC owners who recognize the value of ordering their machines a la carte rather than the complete packages available in many stores.

Gateway has succeeded by jumping quickly on new technology, adopting efficient manufacturing ideas and cultivating a folksy image tied to its rural location.

Now, with the $3,700 Destination PC-TV, it is staking an early claim on a future where people will make less of a distinction between their computers and other home electronics.

``You can make a case that it's really surprising that Gateway would do this,'' said chief executive Ted Waitt. ``But if you think about it, Gateway might be the only company that could do it.''

Since it doesn't build a PC until an order comes in, Gateway's financial risk on Destination is less than other companies would face if they designed the same product but had to build a large quantity, ship them into stores and wait for them to sell.

In addition, its closest rivals - Dell and Micron Technology Inc. - don't concentrate as strongly on the home market, where Destination is chiefly aimed.

Since putting them on sale in April, Gateway has sold a few thousand Destination machines, which come with a 31-inch monitor that is the biggest in mass production. That's far below its 3,800-a-day rate for ordinary desktop and laptop PCs but in line with the company's expectations.

``I'm not displeased at all with the response we're getting so far,'' Waitt said. ``We haven't sold tens of thousands. But the main focus was to start small and make sure that the customer experience was very good.''

He acknowledged the product is one that many people will want to see before they buy, which is a big challenge for Gateway since it doesn't have any relationships with retailers and only runs wholesale outlets here and in Kansas City and Tokyo.

``The market isn't evolved enough for this thing to be broadly accepted on the strength of a picture in a magazine,'' said analyst Richard Zwetchkenbaum of International Data Corp. in Framingham, Mass. ``There are some pathways they can take around that. They can develop some alliances.''

Waitt said Gateway is exploring several ways to get Destination in front of more people. It has already done some TV advertising and, taking an idea from car stereo makers, may set up a touring semi-truck that can stop in mall parking lots or state fairs.

Though it may take awhile to catch fire with customers, Destination has been a hot topic within the PC industry. Executives from many companies, including most of Gateway's rivals, have pointed to it in speeches and conventions as an example of what lies ahead for them.

For instance, Craig Eggers, a Toshiba Corp. marketer of DVD technology, declared in a panel at the Electronic Entertainment Expo in Los Angeles last month: ``This Gateway Destination system is a harbinger of what we're going to see in the future.''

Since April, Compaq Computer Corp. and Thomson Consumer Electronics have announced a partnership to develop something like it and Zenith Electronics, working with a Silicon Valley company called Diba Inc., has promised a TV with some PC functionality by Christmas.

Gateway shocked them all, partly because of its distance from the nation's technology centers.

``Certainly, being based in South Dakota, the chatter that happens in California just doesn't happen here,'' said David Prais, director of domestic marketing.

Waitt and Mike Hammond, now in charge of Gateway's Asia-Pacific operations, started the company in nearby Sioux City, Iowa, in 1985 to build PCs for Texas Instruments Inc. to resell under its label.

In 1986, they started selling products under their own brand, placing ads that pictured Waitt's father's cattle farm with the headline ``Computers from Iowa?'' Since then, Gateway has used magazine ads that wrap silly stories around the technical details of its products.

``You've got to get people's attention and you've got to build subtly the image of the company. And the image of the company is friendly, intelligent, honest, straightforward but very different and unique,'' Waitt said.

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Photo

Photo: Ted Waiit, CEO of South Dakota-based Gateway 2000, d isplays the company's cowhide-design boxes.

Associated Press