• Press Release August 22, 2006 Lap Shun "John" Hui Submits Offer to Acquire Gateway's Retail Operations

LOS ANGELES, CALIFORNIA, August 22, 2006. Mr. Lap Shun (John) Hui announced today that he had submitted to Gateway, Inc. (NYSE:GTW) a proposal to acquire Gateway's retail operations for $450 million, on a debt free, cash free basis. (Please scroll down to read the letter submitted to Gateway).

The proposal is subject to identification of the specific assets and liabilities comprising the retail operations, due diligence, agreement on documentation and obtaining the necessary financing. There is no assurance that any transaction would occur.

Mr. Hui said that "Since selling eMachines to Gateway in early 2004, I have been a patient, passive investor and allowed Gateway to take steps to restructure its business and to attempt to build scale. However, I have a fundamentally different view of the current PC environment and what it takes for a company to be successful in the increasingly competitive PC business. I believe strongly in the Gateway and eMachines brands. But I also believe that in order to compete effectively, Gateway must separate its retail operations from its other businesses and make other changes to improve its margins. My proposal is aimed at accomplishing this separation in a quick and efficient manner to provide value to Gateway's shareholders."

In his proposal, Mr. Hui also stated that, if Gateway would prefer, he would consider a transaction in which all of Gateway's outstanding shares were acquired and the separation of the businesses was accomplished by him after the closing.

August 21, 2006

Gateway, Inc.

7565 Irvine Center Drive
Irvine, California 92618-2930

Attention: Mr. Richard Snyder

Chairman of the Board

Dear Rick:

I am very disappointed that Gateway has chosen not to constructively engage in discussions with me and my advisors on the proposal that I sent to you on August 3, 2006. I believe that management and the Board need to adopt a sense of urgency to address Gateway's problems. The landscape of the PC business has continued to evolve rapidly and Gateway has not reacted. Gateway's stock price has continued to decline and the failure to name a replacement CEO for over six months has left Gateway in a position where it is unable to clearly and credibly articulate its strategic direction to the market.

I strongly believe that separating the Retail business from the Professional and Direct businesses is the right strategic direction for Gateway and the only way for Gateway to enhance its shareholder value. This belief is primarily driven by the following factors:

• The Retail, Professional and Direct businesses are very different. They require different sales strategies, have separate sales channels and a much different sales cycle and require very different levels of post-sale support. As a result, the organizations that are needed to support each of these businesses are different and the businesses themselves have different margins and business models. The Direct business is an impediment to the execution of the retail channel strategy and the large investment in a service support organization and server business necessary for an effective Professional business can not be justified with the Gateway's margins and lack of scale. They should clearly be separated.
• Gateway's Retail business is subsidizing its Professional and Direct businesses. The results of the Professional business and, to a lesser extent the Direct business, have been disappointing at best. Given the different business models and the relatively high levels of capital investment in the Professional business, it appears clear that Gateway's Retail business has been subsidizing the Professional business. The full value of the Retail business, which is the dominant revenue driver at Gateway, is not being achieved due to the drag of the Professional and Direct businesses.
• Gateway has high SG&A expenses due to excess overhead expenses. Despite a number of efforts to reduce overhead through restructurings over the last five years, Gateway still has a cost structure that is too high given the narrow margins in the very competitive PC business. A separation of the Retail business would permit a focus on the SG&A necessary for that business alone and allow for a fuller valuation of the Retail business.

My August 3rd proposal was to purchase the Retail operations (not including the Direct operations) for $450 million, on a debt free, cash free basis, subject to completion of due diligence, including the identification of the specific assets and liabilities to be transferred, and documentation. Based on the original purchase price for eMachines of $262 million, which was primarily comprised of stock, this represents a premium in excess of 70.0%. If the share component of the eMachines purchase price is valued at the latest 30-day VWAP for Gateway common stock, this represents a transaction price more than 3.5x the value of the consideration received in the eMachines transaction. With 372.2 million shares outstanding, the per share value of the offer is equivalent to $1.21 per share (before consideration of the cash and other assets that will remain at Gateway), or approximately 80% of the VWAP at Friday's close of $1.54. This will result in an efficient and quick way to achieve the required separation of the businesses. Alternatively, if Gateway would prefer a sale of the entire company, I am also willing to explore a purchase of 100% of the outstanding shares of common stock. That way, I would take responsibility for separating the Professional and Direct businesses after the closing through a sale or other transaction, or by discontinuing those business lines.

Obviously, any such transaction will be complicated and my advisors have expressed our desire to work together with you to evaluate our proposal and to identify and solve the issues that must be addressed to more fully flesh out the proposal and to make the transaction work for both me and Gateway's other shareholders. As I have stated, I am prepared to move quickly to arrive at a mutually agreeable transaction. Given my familiarity with eMachines, which makes up a large part of the Retail business, I believe that due diligence will move very quickly. In addition, I am confident that commitments for the necessary financing for either transaction can also be obtained quickly. If we work together cooperatively to finalize a transaction structure and to document the transaction, I believe that the sale could be completed in the fourth quarter of this year.

In order to move forward with this proposal, which I believe is very attractive to Gateway and its shareholders, I request that you schedule further meetings with me and my advisors to discuss the details of the proposal, to identify issues that must be resolved and to work in tandem to solve these issues. I also believe that time is of the essence. Please respond with firm times to meet by the end of the day on Tuesday, August 22nd. If I do not hear from you with an acceptable timeframe for substantive discussions by then, I will have to assume that Gateway and its Board of Directors do not wish to discuss my proposal further. In that event, I will not have any alternatives other than to make public my views on the strategic direction of Gateway and my proposal. Although I believe that we would both be better served by working towards a transaction without public disclosure and the attendant press and analyst attention, I also believe that the other shareholders of Gateway and the financial community will enthusiastically embrace my proposal.

Please contact either me or any of my advisors to schedule a meeting. I sincerely hope that we can work together to arrive at a transaction that will benefit Gateway and its shareholders.

Sincerely,

Lap Shun (John) Hui