FOR IMMEDIATE RELEASE

GATEWAY 2000 REPORTS RECORD YEAR
Revenues, Shipments, Margins and Earnings Reach New Highs

NORTH SIOUX CITY, S.D., January 23, 1997 - Gateway 2000^®, Inc. (NYSE: GTW), a global leader in the direct marketing of personal computers, today reported record results for both the fourth quarter and the year ended December 31, 1996.

Gateway 2000 shipped 610,700 PCs during the fourth quarter, a 42% increase from fourth quarter 1995 shipments of 429,000. Fourth quarter net income rose 50% to $88.1 million, or $1.12 per share, from $58.8 million, or $.74 per share, in the fourth quarter of 1995. Quarterly revenue was $1.55 billion, a 25% increase from the $1.25 billion recorded a year ago.

For the twelve months ended December 31, 1996, Gateway 2000 eclipsed all records. Unit shipments for the year jumped 43% from 1,338,000 in 1995 to 1,909,000 in the year just ended. Net income for the year was $250.7 million, a 45% increase from the $173 million reported in 1995. Earnings per share were $3.21 compared to $2.19 last year. Sales in 1996 increased 37% to $5.04 billion compared to $3.68 billion the previous year.

"1996 was a great year for the company, its customers and shareholders," said Ted Waitt, chairman and chief executive officer of Gateway 2000. "We were able to achieve our target of 5% after tax income, a record number of customers took advantage of the best values in the business, and our shareholders enjoyed a 119% appreciation in the value of their Gateway 2000 stock."

FOURTH QUARTER - 1996 BUSINESS REVIEW

Gross margins in the quarter hit 19.5 % – a record high for the company. The higher than normal margins were generally attributable to a favorable product mix, particularly the strong demand for Pentium Pro processors and the company’s ability to ship the product in quantity throughout the quarter. Margins also benefited from seasonally strong consumer business and add-on sales.

Average unit price (AUP), which had been declining steadily during the year, stabilized during the fourth quarter and rose slightly from $2,537 in the third quarter to $2,543 in the fourth quarter. Compared to the fourth quarter of last year, AUP declined approximately 12% from the abnormally high $2,900 realized then. For the year, AUP was $2,638, a decline of 4% from the 1995 AUP of $2,747.

The Gateway Solo^TM line of portables continued to demonstrate its popularity as unit shipments increased more than 30% on a sequential quarter basis and represented nearly 10% of revenue.

Gateway 2000 led the industry in the shipment of Pentium Pro processors during the quarter, with shipments representing approximately 21% of all desktops sold. Exiting the quarter, approximately 27% of all desktop shipments were Pentium Pro.

The Destination^TM big screen PC continued to make inroads in the new convergence category. Sales of the trend-setting product gained momentum during the quarter through both the direct channel and the company's retail partners – Nobody Beats the Wiz and CompUSA.

In Europe, shipments increased 39% in the fourth quarter over the fourth quarter of 1995 and increased sequentially over the third quarter by 48%. As a result of a 17% decline in AUP from the fourth quarter of 1995, revenues in the fourth quarter increased 16% to $171.6 million. For the year as a whole, revenues increased 29 % to $552.7 million on an increase in unit shipments of 41%.

Momentum in the Asia / Pacific region continued to build in the fourth quarter with unit shipments more than 157% above the start-up fourth quarter in 1995 and 38% above the third quarter of 1996. Revenues in the fourth quarter were $72.8 million and for the year were $236.5 million.

Selling, general and administrative expenses for the quarter increased by 23% over the third quarter as a result of increased business activity, but due to strong seasonal sales, operating expenses as a percentage of revenues dropped from 11.9% in the third quarter to 11.3 % in the fourth quarter.

The company's retail pilot project was launched in the fourth quarter with Gateway 2000 Country^SM Stores in Charlotte, North Carolina and New Haven, Connecticut.

1996 HIGHLIGHTS

Gateway 2000 recorded a significant number of milestones in 1996. Included in the list of achievements were:

Consistent demand trends throughout the year created strong momentum in all regions. Gateway 2000 recorded market share gains in all global locations as the direct channel continued to attract both new and repeat buyers.

Improving gross margins through the year resulted in the highest margins in recent history.

Strong portable performance with Solo.

Five millionth system shipped.

Introduction of Destination - the first convergence product in the industry.

Gartner Group upgrade to Tier 1 / Tier 2 rating.

Gateway 2000 emerged as a leader in sales on the Internet. The company's web site averages 1.2 million hits per day, making it one of the most popular destinations on the Internet.

Expansion of TV advertising campaign and dramatically increased brand awareness.

Opening of new showrooms across Europe.

Extensive list of industry and trade magazine awards including:

PC World	Best Buy Budget Notebooks World Class Awards - Business Desktop Computer World Class Awards - Home Desktop Computer Best Buy Notebook PC
PC Computing	Editor's Top Picks - Portables
Fed Computer Week	Best Buy
BYTE	User's Choice Award Best Service and Support Award Reader's Choice Awards - Desktop Computers
Family PC	Recommended Hardware
Computer Shopper	Best Buy Award - Best Place to Buy an Office PC Best Buy Award - Best Place to Buy a Home PC Best Buy Award - Best Value Desktop PC Best Buy Award - Best Family/Home PC Best Buy Award - Service and Support
PC Welt	PC Manufacturer of the Year (Germany)
Personal Comp World	First Prize, Best Hardware Vendor (UK)
PC Direct	Customer Service Excellence Award (UK)
PC Computing	PC Computing Approved Award, Solo 2100 (Japan)

Rapid growth in federal government business. According to government sources, Gateway 2000 is now the leading provider of PC systems on the General Services Administration (GSA) Schedule SIN 132-8. This past year marked just the second full year the company has been included on the GSA vendor list.

BUSINESS OUTLOOK

1997 promises to be an exciting year in terms of product opportunities for Gateway 2000. In the year just ended, the product cycle was driven primarily by faster-than-normal declines in component prices. However, the product roadmap in 1997 will be led by attractive enhancements in both features and technology. Both of these market dynamics play into the strengths of the direct channel.

Market conditions will continue to be competitive in 1997, however the company feels it is well positioned to continue to outpace overall industry growth. Some of the advances that will drive growth in the new year include MMX technology, graphics and video enhancements, aggressive products and service offerings for corporate clients, new display options, audio improvements, exciting storage choices, momentum for Windows NT and the emergence of DVD.

The Solo line of portables will continue to emerge as a major player in the mobile computing field and the Destination big screen PC line will be refreshed with attractive values for customers as Gateway continues its leadership role in this emerging category.

The company expects margins in 1997 to remain relatively flat in relation to 1996 levels. Gateway 2000 will continue to strive to achieve its goal of net income equal to 5% of revenues.

Selling, general and administrative (SG&A) expenses are expected to increase in total dollars in 1997 as the company continues its infrastructure investments in customer support , international expansion and aggressive marketing programs. However, as a percentage of sales, the company expects that 1997 SG&A will be flat to slightly down.

"These are exciting times for our industry," said Waitt. "Gateway 2000 and its 9,000 worldwide employees look with anticipation on the opportunities this new year will bring. We continue to be thankful for the tremendous loyalty our customers have shown us during our 11 years in this challenging business."

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; and inventory risks due to shifts in market demand. Additional factors are described in the company’s reports filed with the Securities and Exchange Commission.

About Gateway 2000

Gateway 2000 (NYSE: GTW), a Fortune 500 company founded in 1985, is a global leader in the direct marketing of PCs. The company, headquartered in North Sioux City, South Dakota, has manufacturing facilities in the United States, Ireland and Malaysia and employs over 9,000 people worldwide. Gateway 2000Ň products and services consistently win top awards from leading industry publications.

Gateway 2000 is a registered trademark, and Gateway Solo, Gateway 2000 Country and Destination are trademarks or servicemarks of Gateway 2000, Inc. All other brands or product names are trademarks of their respective companies.

Copyright © 1996 Gateway 2000 Inc. All rights reserved.
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