Harbert Management Discloses 10.2% Stake in Gateway

| About: Gateway Inc. (GTW)

In a 13D filing yesterday morning on Gateway Inc. (GTW), Harbert Management disclosed a 10.2% stake (37.8 million shares) in the company.

On August 21, 2006, the Master Fund, the Special Fund and Firebrand submitted a letter to the Issuer's Chairman and interim CEO to offer the board and management assistance in their efforts to enhance shareholder value.

In the letter the group said, "The motivation for our investment in Gateway can be distilled to one simple thesis; there is nothing wrong with Gateway that can't be fixed with what's right with Gateway."

The group also said, "We believe our backgrounds with consumer brands as founders, CEOs and strategic investors can add horsepower to your current efforts to recruit the best possible leadership. In addition, we can aid your efforts to articulate and reinforce Gateway's brand associations resulting in tangible differentiation that we believe will translate to increased margins."

A Copy of the Letter:

August 21, 2006

Richard D. Snyder
Chairman and Interim Chief Executive Officer
Gateway, Inc.
7565 Irvine Center Drive
Irvine, CA 92618

Mr. Snyder:

I hope this letter finds you well. On behalf of Firebrand Partners and Harbinger Capital Partners, I'm writing to request the opportunity to meet with you to discuss how we can assist in your, and the board's, effort to drive the business and build value at Gateway.

We are a group of investors who beneficially own in excess of 10% of the outstanding common stock of Gateway, Inc. The motivation for our investment in Gateway can be distilled to one simple thesis; there is nothing wrong with Gateway that can't be fixed with what's right with Gateway. We believe that the firm's brand equity, heritage of innovation, and retail channel strength, position the firm to be a leader in the evolution toward design-driven, user-friendly, media facile PCs.

We believe our backgrounds with consumer brands as founders, CEOs and strategic investors can add horsepower to your current efforts to recruit the best possible leadership. In addition, we can aid your efforts to articulate and reinforce Gateway's brand associations resulting in tangible differentiation that we believe will translate to increased margins.

We hope our investment and background(s) reflect the expertise and resolve we can bring to Gateway and its shareholders. We've spent a great deal of time researching the brand and are enthusiastic about our investment and the prospect of committing time and effort to help you in your endeavors. I will reach out to you in the next couple of days in hope of setting up a meeting as soon as mutually convenient. If needed, I can be reached at XXX-XXX-XXXX.

Regards,
Scott Galloway
Scott Galloway, Firebrand Partners