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SEC Response Letter

 FOIA Confidential Treatment Request

 Pursuant to Rule 83 by Gateway, Inc.

 May 20, 2005

 VIA EDGAR
TRANSMISSION (CORRESP.)

 Securities and Exchange Commission

 Division of Corporation Finance

 450 Fifth Street, N.W.

 Washington, D.C. 20549-0303

 Attention: Mr. Hugh Fuller

Re:
Gateway, Inc.

Registration Statement on Form S-3

File No. 333-123579

Annual Report on Form 10-K for the year ended December 31, 2004

File No. 000-22784

 Dear Mr. Fuller:

 Reference is
made to the comments of the Staff of the Securities and Exchange Commission (the “SEC” or the “Staff”) with respect to the above referenced registration statement on Form S-3 (the “Form S-3”) of Gateway, Inc. (the
“Company”) in the letter dated April 26, 2005 (the “S-3 Comment Letter”) and the annual report on Form 10-K for the year ended December 31, 2004 of the Company (the “Form 10-K”) in the letter dated April 27, 2005 (the
“10-K Comment Letter” and, together with the S-3 Comment Letter, the “Comment Letters”), each addressed to Roderick M. Sherwood, III, Senior Vice President and Chief Financial Officer of the Company.

 On behalf of the Company, I am writing to respond to the comments and to
indicate the changes that have been made in Amendment No. 1 to the Form S-3 (the “Amendment”) that is being filed today by the Company with the SEC. The numbered paragraphs below correspond to the headings and numbers set forth in the
Comment Letters, the text of which is copied below in italics for your reference. Except as otherwise indicated, all page numbers referenced by the Company in this letter refer to the page numbers contained in the Amendment or the Form 10-K, as
applicable.

 For reasons of business confidentiality, in a
separate letter dated the date hereof, the Company requests that the information in (i) the penultimate sentence of the first paragraph of the response to question 18 (“· Tell us how the change in your distribution model … ?”) on page 2005.05.20.16 hereof, (ii) the recorded sales rebate expense and sales returns for each of the years ended December 31, 2002, 2003 and 2004 in
the fifth paragraph of the response to question 18 (“· Quantify for us the amount recorded … ?”) on page 2005.05.20.17 hereof, (iii)
the

 2005.05.20.1

estimates and actual results of rebate redemptions in the years ended December 31, 2004 and return allowances in the years ended December 31, 2002, 2003 and
2004 in the sixth paragraph to the response to question 18 (“· Provide an analysis of how … ?”) on page 2005.05.20.17 hereof and
(iv) the second and last paragraph of the response to question 19 on page 2005.05.20.18 hereof, not be disclosed in response to any request made under the Freedom of Information Act, 5 U.S.C.A. §552 or otherwise. Accordingly, pursuant to Rule
83 (17 C.F.R. 200.83) of the Rules of Practice of the Commission and in compliance with the procedures outlined in the Staff’s Current Issues and Rulemaking Projects, Quarterly Update, Division of Corporation Finance (June 30, 2001), a complete
copy of this letter will be provided only in paper form and not electronically as correspondence under the SEC’s EDGAR system.

 In addition, on behalf of the Company, the undersigned acknowledges that (i) the Company is responsible for the adequacy and accuracy of the disclosure in
the Form 10-K, (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the SEC from taking action with respect to the Form 10-K and (iii) the Company may not assert Staff comment as a defense in any proceeding
initiated by the SEC or any person under the federal securities laws of the United States.

 S-3 Comment Letter

 Form
S-3

 Registration Statement Cover Page

1.
Please provide a good faith estimate of the number of shares of common stock issuable upon conversion of the Senior Convertible Notes. See Item 501(b)(2) of Regulation S-K.

 The undersigned respectfully submits that
34,762,457 shares of common stock represents a good faith estimate of the number of shares of common stock issuable upon conversion of the Senior Convertible Notes. This number is reflected in the fee table on the cover page of the Form S-3
initially filed with the SEC and represents the maximum number of shares of common stock issuable upon conversion at the conversion price of $8.63 per share.

However, as described in the Form S-3 in the section entitled “Prospectus Summary—The Offering—Conversion” and “Description of
Notes—Conversion of Notes,” the provisions of the indenture relating to the conversion of the Senior Convertible Notes are subject to adjustment as a result of, among other things, (i) issuances of common stock as a dividend on the
Company’s common stock, (ii) issuances to stockholders of warrants to purchase additional common stock, (iii) stock splits and (iv) reverse stock splits. If any such event occurs, the resulting conversion adjustments will affect the number of
shares of common stock issuable upon conversion of the Senior Convertible Notes. Furthermore, the Company has retained the right to elect to deliver upon conversion, in lieu of shares of common stock, cash or a combination of cash and common stock.
Such

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an election would also affect the number of shares of common stock issuable upon conversion of the Senior Convertible Notes.

 For the reasons outlined above, the undersigned respectfully submits that it
has made a good faith estimate of the number of shares issuable upon conversion of the Senior Convertible Notes and that any attempt to refine its estimate to account for conversion adjustments or an election to settle all or part of its obligations
in respect of the Senior Convertible Notes in cash would be arbitrary and inconsistent with the practice of the Company, other issuers and the SEC.

 Selling Holders, pages 45-49

2.
For each non-reporting entity, identify the natural persons who exercise voting and/or dispositive powers over the securities. See interpretation I.60 of the July 1997 manual of
publicly available CF telephone interpretations, as well as interpretation 4S of the Regulation S-K portion of the March 1999 supplement to the CF telephone interpretation manual.

 The requested revision has been made to the selling holders tables on pages
46-48.

3.
We note that you identify four selling holders as broker-dealers and you disclose that they are underwriters in the “Plan of Distribution.” With respect to your selling
holder table, please identify each selling holder who is a broker-dealer affiliate. We note your disclosure in “Plan of Distribution” that each such selling holder acquired the securities to be resold in the ordinary course of business and
had any agreements or understandings, directly or indirectly, with any person to distribute the securities at the time of purchase.

 The requested revision has been made to the selling holders tables on pages 46-48.

4.
Disclosure associated with your selling security holder table indicates that you intend to identify a certain percentage of unidentified selling holders (except for future
transferees, pledgees, donees or successors of selling holders) by prospectus supplement or amendment to the registration statement, if required. Please revise this language to indicate that unnamed security holders at the time of effectiveness of
the registration statement will be identified by post-effective amendment.

 The requested revision has been made to the disclosure associated with the selling holders tables on pages 46-48.

 Legality Opinion

5.
 You indicate that your legality opinion covers an indeterminate number of common shares issuable upon conversion of the Senior Convertible Notes. Please revise
to a good

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faith estimate of the number of these shares. Further, please supplementally confirm that your reference to the Delaware Corporate Law encompasses the
Delaware Constitution and judicial opinions. See our CF Current Issues Outline for November 2000 at Section VIII.A.14.

 With respect to the comment regarding the number of shares of common stock issuable upon conversion of the Senior Convertible Notes, please see the
Company’s response to question (1) above which provides a good faith estimate of the number of shares of 34,762,457 at the conversion price of $8.63 per share. The legal opinion of Company counsel covers all of the shares issuable upon
conversion of conversion of the Senior Convertible Notes. For the purpose of the opinion, the undersigned respectfully submits that it would be inappropriate to provide an estimate of such shares because it may give rise to an inaccurate belief that
the opinion covers some number of shares other than that actually issued upon conversion.

 Company’s counsel has confirmed that, for the purposes of its opinion, the phrase, “General Corporation Law of the State of Delaware” (the “DCGL”) means the DGCL, the applicable provisions of
the Delaware constitution and reported judicial decisions interpreting these laws.

 Incorporation by Reference

6.
Please incorporate by reference your recent Form 8-K concerning your agreement with Microsoft.

 The requested revision has been made to the section of the Form S-3 entitled “Incorporation By Reference” on page
53.

 10-K Comment Letter

 As described in more detail in the responses to the comments below, the Company believes the
nature and materiality of any proposed changes to the disclosures does not warrant amending the Form 10-K and requests that any changes be addressed in a prospective manner.

 Management’s Discussion and Analysis

 Results of Operations, Page 29

1.
 Your current disclosure indicates that sales were impacted by the contribution of the eMachines acquisition, the closing of retail stores and the transition to a
retail-distribution method. Tell us what consideration was given to quantifying the impact of each of the factors that contributed to the material changes in each income statement line item. Please provide the staff analysis of the amounts in the
periods ended December 31,

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2004. In this regard see the Commission’s “Guidance Regarding Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” Release No. 33-8350.

 The Company considered each of the factors noted above and the impact of each on the financial statements and submits that the detailed disclosure in the section captioned, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Segment Performance” on pages 34-36 is adequate.

 With respect to the impact of the eMachines acquisition on Gateway’s third party retail distribution segment, the undersigned draws the Staff’s
attention to the table on page 35 which reflects a 602.7% year-over-year sales revenue growth and a 409.4% increase to operating income for this segment.

 With respect to the impact of the closure of the Company-owned retail stores, the undersigned draws the Staff’s attention to the section captioned,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Performance—Direct” which states, “The Gateway-owned stores previously contributed an average of approximately $300 million
in net sales per quarter.” The transition to a retail-distribution model resulted in the Company selling both Gateway and eMachines branded product in third-party retail stores. Sales generated through third-party retail during 2004 were
approximately $1.5 billion as disclosed in the table on page 35 and in Note 12 on page 69.

 In addition, the Company provided the following disclosure in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Selling, General and
Administrative Expenses,” “[t]he decline in SG&A reflects the closure of our retail stores and other facilities (approximately $55 million), rationalization of headcount costs (approximately $88 million), lower depreciation on IT and
fixed assets (approximately $75 million) and reduced direct marketing and costs associated with the shift to third-party retail and other cost-savings programs (approximately $111 million).”

2.
You disclose on page 25 that you have realigned the organization to focus on “front-line” selling. Define “front-line” selling and further explain how this
realignment impacted operations.

 The
Company defines “front-line” as the direct interactions between the Company’s sales staff and its customers through our direct sales force. As part of the Company’s restructuring and transformation efforts, it realigned the sales
organization to better focus on direct selling to end users and third-party retail customers and reduced order management and other administrative support functions, which are non-direct sales activities. The Company will define this term with
greater precision in future filings.

 2005.05.20.5

3.
We note that your consumer services support and professional services support are included in the major product group revenues for Convergence/non-PC Products and Services for
2004. Of the $822,960,000 of Convergence/non-PC Products and Services revenue in 2004, tell us if any of the revenue relates to services for 2004. To the extent service revenue is material, tell us how you considered Rule 5-03.1 and 2 of Regulation
S-X with regards to your income statement presentation.

 Convergence/non-PC Products and Services include all products and services sold by the Company with the exception of PCs, servers and monitors sold with desktop PCs. Specific products and services included in the
“Convergence/non-PC products and services” category are PC peripherals, software, accessories, extended warranty services, training, internet access, plasma and LCD TVs, digital music players, enterprise system and networking products and
services. Of the approximately $823 million of Convergence/non-PC Products and Services revenue reported in 2004, approximately $313 million was derived from services. Rule 5-03 of Regulation S-X provides that revenues from services may be combined
with net sales of tangible products if such revenues are not more than 10% of total net sales of approximately $3.6 billion in 2004. Since revenues from services were less than 10% of total net sales, the Company was not required to separately state
revenues from services.

4.
You disclose on page 30 that margins were negatively impacted by the shift from Gateway-owned retail stores to third-party retail stores. It is unclear from your disclosure why
this is the case. Tell us the nature and cost structure of these two distribution channels and why the third-party retail sales would have a negative impact on margins more so than Company-owned retail stores. Describe any arrangements and changes
to those arrangements involving price-protection, concessions, returns or rebates associated with third-party retailers both prior to and after the transition. Tell us how you considered disclosing this information in your Form 10-K.

 The shift in sales from our direct segment
to third-party retail adversely affects gross profit due to lower retail gross margins, reflecting the fact that products sold to third-party retailers are at wholesale prices as compared to retail pricing obtained through sales to customers
directly at the former Gateway stores. Generally, the Company has not and does not offer price protection, stock balance returns, rebates or any other concession to third-party retailers. The Company does provide rebates to end users on certain
products. See Question 18 for further discussion.

 Should the
Company engage in price protection, concessions or rebates to the retailer, it will provide additional disclosure regarding these issues in future filings.

5.
 Your disclosure on page 31 lists several factors that contributed to the decrease in margins (i.e., higher rebates, sales of reserved inventory, stores closings