SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C.  20549

                           FORM 10-Q

X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended September 30, 1998
                               OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
    For the transition period from             to

             Commission file number     0-22784

                       GATEWAY 2000, INC.
     (Exact name of registrant as specified in its charter)

            Delaware                      42-1249184
(State or other jurisdiction of        (I.R.S. Employer
 incorporation or organization)         Identification No.)

                    4545 Towne Centre Court
                  San Diego, California 92121
       (Address of principal executive offices, zip code)

Registrant's telephone number, including area code: (619)799-3401


      Indicate by check mark whether the registrant (1) has filed
all  reports required to be filed by Section 13 or 15(d)  of  the
Securities  Exchange Act of 1934 during the preceding  12  months
(or  for such shorter period that the registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days.  Yes   X      No       .

      As  of November 10, 1998, there were 156,286,837 shares  of
the  Common  Stock  of  the Company, $.01 par  value  per  share,
outstanding.   As of November 10, 1998, there were no  shares  of
the  Company's  Class A Common Stock, $.01 par value  per  share,
outstanding.
                           I.   FINANCIAL INFORMATION
                                        
Item 1. Financial Statements
<TABLE>
                               Gateway 2000, Inc.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
         For the three and nine months ended September 30, 1997 and 1998
                    (in thousands, except per share amounts)
                                   (Unaudited)
<CAPTION>
                                        
                                   Three months Ended September 30,    Nine Months ended September 30,
                                        1997             1998              1997              1998
<S>                                 <C>              <C>               <C>                <C> 
Net Sales                           $   1,504,851    $   1,815,516     $   4,316,845      $   5,162,352
Costs of goods sold                     1,309,601        1,437,709         3,595,444          4,114,363
   Gross profit                           195,250          377,807           721,401          1,047,989
Selling, general and                                                                                   
  administrative expenses                 219,258          264,452           570,680            741,445
Nonrecurring expenses                     113,842                -           113,842                  -
   Operating income (loss)              (137,850)          113,355            36,879            306,544
Other income, net                           5,612           12,653            20,195             32,918
   Income (loss)before income                                                                          
     taxes                              (132,238)          126,008            57,074            339,462
Provision (benefit) for income                                                                         
   taxes                                 (25,125)           45,363            40,187            122,206
   Net income (loss)                $   (107,113)       $   80,645        $   16,887        $   217,256
                                                                                                       
Share and per share information:                                                                       
   Net income (loss) per share:                                                                        
      Basic                            $   (0.70)         $   0.52          $   0.11           $   1.40
      Diluted                          $   (0.68)         $   0.51          $   0.11           $   1.37
   Weighted average shares                                                                             
    outstanding:
      Basic                               153,980          155,849           153,761            155,280
      Diluted                             156,875          159,518           156,373            158,708
</TABLE>

<TABLE>

                               Gateway 2000, Inc.
                           CONSOLIDATED BALANCE SHEETS
                    December 31, 1997 and September 30, 1998
                    (in thousands, except per share amounts)
                                        
<CAPTION>
                                                                                     
                                                        December 31,           September 30,
                                                            1997                   1998
                                                                                (unaudited)
<S>                                                          <C>                    <C>
ASSETS                                                                      
Current assets:                                                                    
   Cash and cash equivalents                                  $   593,601           $   871,351
   Marketable securities                                           38,648               132,156
   Accounts receivable, net                                       510,679               559,538
   Inventory                                                      249,224               198,016
   Other                                                          152,531               183,816
      Total current assets                                      1,544,683             1,944,877
Property, plant and equipment, net                                336,469               416,044
Internal use software costs, net                                   39,998                37,704
Intangibles, net                                                   82,590                69,924
Other assets                                                       35,531                43,252
                                                            $   2,039,271         $   2,511,801
                                                                                               
LIABILITIES AND STOCKHOLDERS' EQUITY                                                           
Current liabilities:                                                                           
   Notes payable and current maturities of long-                                               
     term obligations                                          $   13,969             $   9,659
   Accounts payable                                               488,717               677,721
   Accrued liabilities                                            271,250               347,466
   Accrued royalties                                              159,418               114,183
   Other current liabilities                                       70,552                63,977
        Total current liabilities                               1,003,906             1,213,006
Long-term obligations, net of current maturities                    7,240                 2,481
Warranty and other noncurrent liabilities                          98,081               100,025
        Total liabilities                                       1,109,227             1,315,512
                                                                                               
Contingencies (Note 6)                                                                         
                                                                                               
Stockholders' equity:                                                                          
   Preferred Stock, $.01 par value, 5,000 shares                                               
     authorized; none issued and outstanding                            -                     -
   Class A Common Stock, nonvoting, $.01 par                                                   
     value, 1,000 shares authorized; none issued                                               
     and outstanding                                                    -                     -
   Common Stock, $.01 par value, 220,000 shares                                                
     authorized; 154,128 shares and 156,034                                                    
     shares issued and outstanding, in 1997 and                                                
     1998, respectively                                             1,541                 1,560
   Additional paid-in capital                                     299,483               349,101
   Retained earnings                                              634,509               851,766
   Accumulated other comprehensive income (loss)                  (5,489)               (6,138)
         Total stockholders' equity                               930,044             1,196,289
                                                            $   2,039,271         $   2,511,801
</TABLE>
              
                                                                            
<TABLE>
                                                                            
                                        
                               Gateway 2000, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the nine months ended September 30, 1997 and 1998
                                 (in thousands)
                                   (Unaudited)
<CAPTION>
                                        
                                                          Nine Months Ended September 30,
                                                            1997                   1998
<S>                                                            <C>                  <C>
Cash flows from operating activities:                                       
   Net income                                                  $   16,887           $   217,256
   Adjustments to reconcile net income to net                                                  
    Cash provided by operating activities:                                                     
      Depreciation and amortization                                63,268                76,224
      Provision for uncollectible accounts                                                     
       Receivable                                                   2,422                 2,278
      Deferred income taxes                                      (63,749)              (22,906)
      Nonrecurring items                                          113,842                     -
      Other, net                                                      256                   741
      Changes in operating assets and                                                          
       Liabilities:
         Accounts receivable                                     (20,665)              (51,137)
         Inventory                                               (83,524)                51,208
         Other assets                                            (63,679)              (21,826)
         Accounts payable                                          41,891               187,903
         Accrued liabilities                                       12,184                76,878
         Accrued royalties                                          5,092              (45,235)
         Other current liabilities                               (30,548)                16,765
         Other liabilities                                         36,894                 6,515
            Net cash provided by operating                                                     
              activities                                           30,571               494,664
Cash flows from investing activities:                                                          
   Capital expenditures                                          (94,094)             (128,983)
   Internal use software costs                                   (11,130)               (7,927)
   Purchases of available-for-sale securities                    (32,286)             (142,171)
   Proceeds from maturity of available-for-sale                                                
    securities                                                      8,985                15,026
   Proceeds from sales of available-for-sale                                                   
    securities                                                      2,000                33,898
   Acquisitions, net of cash acquired                           (142,320)                     -
   Other, net                                                     (2,944)                 (868)
      Net cash used in investing activities                     (271,789)             (231,025)
Cash flows from financing activities:                                                          
   Proceeds from issuance of notes payable                         10,000                     -
   Principal payments on long-term obligations                                                 
    and notes payable                                            (13,972)              (11,693)
   Stock options exercised                                          5,171                25,699
      Net cash provided by financing activities                     1,199                14,006
   Foreign exchange effect on cash and cash                                                    
    equivalents                                                   (2,354)                   105
   Net increase (decrease) in cash and cash                                                    
    equivalents                                                 (242,373)               277,750
   Cash and cash equivalents, beginning of                                                     
    Period                                                        516,360               593,601
   Cash and cash equivalents, end of period                   $   273,987           $   871,351
                                                                                               
</TABLE>
              

Notes to Consolidated Financial Statements

1. General:

        The    accompanying   unaudited   consolidated   financial    statements
of   Gateway   2000,   Inc.   (the  "Company")  as   of   September   30,   1998
and   for   the   three   and  nine  months  ended  September   30,   1997   and
1998    have    been   prepared   on   the   same   basis   as    the    audited
consolidated   financial   statements  for   the   year   ended   December   31,
1997   and,   in   the   opinion   of  management,   reflect   all   adjustments
(consisting   of   normal   recurring   adjustments)   necessary    to    fairly
state    the    consolidated   financial   position,   and   the    consolidated
results    of   operations   and   cash   flows   for   the   interim   periods.
The     results    for    the    interim    periods    are    not    necessarily
indicative   of   results  to  be  expected  for  any   other   interim   period
or   the   entire  year.   These  financial  statements  should   be   read   in
conjunction    with    the    Company's    audited    consolidated     financial
statements    and   notes   thereto   for   the   year   ended   December    31,
1997,   which   are   included  in  the  Company's   1997   Annual   Report   to
the    Securities    and    Exchange   Commission    on    Form    10-K.     The
preparation     of     the     consolidated     financial     statements      in
conformity    with    generally   accepted   accounting   principles    requires
management    to    make   estimates   and   assumptions   that    affect    the
reported     amounts    of    assets    and    liabilities,    disclosure     of
contingent    assets   and   liabilities,   and   the   reported   amounts    of
revenues   and   expenses   during   the  reported   period.    Actual   results
could differ from those estimates.

2. Nonrecurring Expenses:

        The    Company    recorded   several   nonrecurring    pretax    charges
during   the   third  quarter  of  1997  totaling  $113.8   million.    Of   the
nonrecurring   charges,   $59.7  million  was   for   the   write-off   of   in-
process    research   and   development   acquired   in   the    purchases    of
Advanced   Logic   Research,   Inc.  (ALR)   and   certain   assets   of   Amiga
technologies.    Also   included   in   the   nonrecurring   charges    was    a
non-cash     write-off     of    $45.2    million     resulting     from     the
abandonment    of    a   capitalized   internal-use   software    project    and
certain    computer    equipment.     In    addition,    $8.6    million     was
recorded   for   severance  of  employees  and  the   closing   of   a   foreign
office as part of the Company's ongoing global reorganization.

3. Comprehensive Income:

     Effective   January   1,   1998,   the   Company   adopted   Statement   of
Financial     Accounting     Standards    (SFAS)     No.     130,     "Reporting
Comprehensive   Income."    SFAS   130   establishes   new   rules    for    the
reporting   of   comprehensive   income  and   its   components;   however   the
adoption   of   this   statement  had  no  impact  on  the   Company's   current
or   previously   reported   net   income   or   stockholders'   equity.    SFAS
130    requires   the   display   and   reporting   of   comprehensive   income,
which    includes    all   changes   in   stockholders'    equity    with    the
exception      of     additional     investments     by     stockholders      or
distributions    to    stockholders.     Comprehensive    income     for     the
Company     includes     net     income,    foreign     currency     translation
effects,    and    unrealized    gains   or   losses    on    available-for-sale
securities   which   are   charged  or  credited  to   the   accumulated   other
comprehensive income (loss) account within stockholders' equity.
     
     Comprehensive    income   (loss)   for   the   three   and    nine    month
periods ended September 30, 1997 and 1998 was as follows:
<TABLE>
<CAPTION>
     
                                        Three Months Ended                Nine Months Ended
                                           September 30,                    September 30,
                                       1997             1998            1997             1998
                                                           (in thousands)           
                                                             (unaudited)
<S>                                 <C>                 <C>             <C>             <C> 
Net income (loss)                   $  (107,113)        $  80,645       $  16,887       $  217,256
Foreign currency translation             (3,110)              875         (1,294)            (997)
Unrealized gains on available-                                                                    
  for-sale securities                        102              194             102              348
                                                                                                  
Total comprehensive income (loss)   $  (110,121)        $  81,714       $  15,695       $  216,607
</TABLE>
                 

4. Share and Per Share Information:
     
     In    1997,    the    Financial   Accounting   Standards    Board    (FASB)
issued    Statement    of    Financial    Accounting    Standard    No.     128,
"Earnings    per   Share"   which   replaced   the   calculation   of    primary
and    fully    diluted   earnings   per   share   with   basic   and    diluted
earnings    per    share.    Unlike   primary   earnings   per   share,    basic
earnings    per    share    excludes   any   dilutive   effect    of    options,
warrants    and   convertible   securities.    Earnings   per   share    amounts
for    all    periods    presented   have   been   restated    to    SFAS    128
requirements.

The   following   table  sets  forth  a  reconciliation  of   shares   used   in
the computation of basic and diluted earnings per share.
<TABLE>
<CAPTION>
     
                                        
                                   Three Months Ended              Nine Months Ended
                                      September 30,                  September 30,
                                  1997            1998            1997            1998
                                                     (in thousands)           
                                                      (unaudited)
<S>                            <C>                <C>            <C>            <C> 
Net income (loss) for basic                                                               
  and diluted earnings per                                                                
  share                        $  (107,113)       $  80,645      $  16,887      $  217,256
Weighted average shares for                                                               
  basic earnings per share          153,980         155,849        153,761         155,280
Dilutive effect of stock                                                                  
  options                             2,895           3,669          2,612           3,428
Weighted average shares for                                                               
  diluted earnings per                                                                    
  share                             156,875         159,518        156,373         158,708
                                                                                          
</TABLE>


5. Selected Balance Sheet Information:

                                          December 31,       September 30,
                                              1997                1998
                                                              (unaudited)
                                                   (in thousands)
Accounts receivable, net:                                   
   Accounts receivable                        $   530,743        $   576,394
   Less allowance for uncollectible                                         
     accounts                                    (20,064)           (16,856)
                                              $   510,679        $   559,538
                                                                            
Inventory:                                                                  
   Components and subassemblies               $   226,588        $   185,326
   Finished goods                                  22,636             12,690
                                              $   249,224        $   198,016
                                                                            

6. Contingencies:

       The   Company   is  a  party  to  various   lawsuits   and
administrative proceedings arising in the ordinary course of  its
business.  The Company evaluates such lawsuits and proceedings on
a case-by-case basis, and its policy is to vigorously contest any
such  claims  which it believes are without merit. The  Company's
management believes that the ultimate resolution of such  pending
matters  will  not  materially  adversely  affect  the  Company's
business,  financial  position, results  of  operations  or  cash
flows.

Item  2.    Management's  Discussion and  Analysis  of  Financial
Condition and Results of Operations

Results of Operations

      The  following table sets forth, for the periods indicated,
certain  data derived from the Company's consolidated  statements
of operations, expressed as a percentage of net sales:

<TABLE>
<CAPTION>
                                                 Three Months Ended              Nine Months Ended
                                                   September 30,                   September 30,
                                               1997             1998            1997           1998
<S>                                            <C>              <C>             <C>            <C>        
Net sales                                         100.0%           100.0%         100.0%          100.0%
Cost of goods sold                                 87.0%            79.2%          83.3%           79.7%
   Gross profit                                    13.0%            20.8%          16.7%           20.3%
Selling, general and administrative                                                                     
  expenses                                         14.6%            14.6%          13.2%           14.4%
Nonrecurring items                                  7.6%                -           2.6%               -
   Operating income (loss)                        (9.2)%             6.2%           0.9%            5.9%
Other income, net                                   0.4%             0.7%           0.4%            0.7%
   Income (loss) before income taxes              (8.8)%             6.9%           1.3%            6.6%
Provision (benefit) for income taxes              (1.7)%             2.5%           0.9%            2.4%
   Net income (loss)                              (7.1)%             4.4%           0.4%            4.2%
                                                                                                        
</TABLE>


Third    Quarter   1998   Compared   to   Third   Quarter   1997   and    Second
Quarter 1998

       Sales   increased   21%  in  the  third  quarter   of   1998   to   $1.82
billion   from   $1.50   billion   in  the   third   quarter   of   1997.   Unit
shipments    in    the    third   quarter   of    1998    increased    43%    to
approximately    887,000   units   from   approximately   622,000    units    in
the   third   quarter   of   1997.   Continued   unit   growth   was   primarily
the    result   of   the   strong   performance   in   the   Americas    region,
accounting   for   89%   of   total   unit   sales.    Weighted   average   unit
prices   (AUP's)   were   approximately  15%  lower   in   the   third   quarter
of    1998   versus   the   comparable   period   of   1997.    These   declines
were    caused   by   continuing   industry-wide   trends   to   lower    priced
PCs    and   continued   reductions   in   component   costs   that   have   not
been   offset   by   the   introduction  of  newer   technologies.    Sales   in
the   Americas   region   for   the  third  quarter   of   1998   increased   to
$1.61    billion,    an   increase   of   24%   versus   the    $1.30    billion
recorded   in   the  third  quarter  of  1997  and  unit  shipments   grew   46%
over   the   prior   quarter.    Sales   in   the   European   region   in   the
third   quarter   of   1998   were  $106.8  million,  down   approximately   16%
compared   to   the  third  quarter  of  1997  while  unit  shipments   in   the
region   were   flat.    Sales   in   the   Asia   Pacific   region   grew    to
$101.8   million,   an   increase   of  26%   versus   the   comparable   period
of   1997   while   unit  shipments  for  the  third  quarter   of   1998   grew
54% over the third quarter of 1997.

        Sales    and   units   shipped   in   the   third   quarter   of    1998
increased   12%   and   21%,   respectively,  from   the   second   quarter   of
1998.     AUP's    in    the    third   quarter    of    1998    decreased    7%
sequentially.    Sales   in   the  Americas  region   in   the   third   quarter
of   1998   increased  17%  from  the  second  quarter  of  1998   while   units
shipped   increased   27%.    In   the  European   region,   sales   and   units
shipped    decreased   18%   and   15%,   respectively,    from    the    second
quarter   of   1998.    Sales  in  the  Asia  Pacific  region   in   the   third
quarter   of   1998   decreased   13%  from  the   second   quarter   of   1998,
while unit shipments decreased 11%.

       In   addition   to  robust  desktop  unit  sales,  unit  sales   of   the
Company's    portable   products   hit   record   levels   in    the    quarter,
increasing   96%   and   38%,   respectively,   over    the
third   quarter   of   1997  and  the  second  quarter   of   1998,   accounting
for   11%   of   total   unit   sales.   Server  unit   sales   increased   297%
over   the   third   quarter   of   1997   when   the   Company   entered    the
server    market   with   the   acquisition   of   Advanced   Logic    Research.
On     a    sequential    basis,    server    unit    sales    increased    27%.
Shipments   of   the   Company's   convergence  products   increased   80%   and
48%,   respectively,    over  the  third  quarter  of  1997   and   the   second
quarter of 1998.

       Gross   profit   in   the  third  quarter  of   1998   rose   to   $377.8
million,   an   increase   of  approximately  93%   from   the   third   quarter
of   1997   and   an   increase  of  approximately   13%   versus   the   second
quarter   of   1998.   As  a  percentage  of  sales,  gross   profit   for   the
third   quarter   of   1998   increased  to  20.8%   from   13.0%   and   20.6%,
respectively,   in   the  third  quarter  of  1997  and   the   second   quarter
of    1998.     The   increase   over   the   third   quarter   of    1997    is
partially     attributable    to    the    adverse     effects     of     excess
inventories   experienced   in  the  third  quarter   of   1997.    During   the
third    quarter   of   1997   there   were   significant   declines   in    the
market   value   of   many   inventory  components.   In   order   to   mitigate
the   impact   of   these   excess  inventories,  the   Company   sold   product
with   profit   margins   below   targeted  levels.    In   addition,   reserves
were    recorded   against   excess   and   obsolete   inventories   still    on
hand   at   the   end   of   the  third  quarter  of  1997.    Continued   gross
profit   improvement   is   also  attributable   to   higher   margin   products
sold   under   new   marketing  initiatives  as  well   as   the   benefits   of
the   direct   model   and  decreasing  component  costs.     Demand   for   the
Company's   products   was   consistent  throughout   the   third   quarter   of
1998;    however,    the   Company   experienced   a   number    of    component
quality   and   shortage   problems  causing  backlog   to   increase   by   40%
over the end of the second quarter of 1998.

       Selling,   general   and   administrative   (SG&A)   expenses   for   the
third    quarter    of    1998    increased   approximately    21%    and    6%,
respectively,   versus   the  third  quarter  of   1997   and   second   quarter
of   1998.   The   increase   is  attributable  to  the   strong   unit   growth
experienced    during   the   quarter.    In   support    of    the    continued
growth,   the   Company   also   opened   a   new   manufacturing   and    sales
facility   in   Salt  Lake  City  later  in  the  quarter.   As   a   percentage
of   sales,   SG&A   in   the   third  quarter   of   1998   was   approximately
14.6%,   flat   compared  to  the  third  quarter  of   1997   and   a   decline
from   15.4%   in   the   second   quarter  of  1998.    SG&A   increased   less
than    previously    anticipated    by    management    due    to    continuing
emphasis on cost control measures.

        The    Company    recorded   several   nonrecurring    pretax    charges
totaling   $113.8   million   for  the  third   quarter   of   1997.    Of   the
nonrecurring   charges,   $59.7  million  was   for   the   write-off   of   in-
process   research   and   development  acquired  in   the   purchase   of   ALR
and   certain   assets   of   Amiga  Technologies.    Also   included   in   the
nonrecurring    charges   was   a   non-cash   write-off   of   $45.2    million
resulting    from    the    abandonment   of    a    capitalized    internal-use
software    project    and   certain   computer   equipment.     In    addition,
$8.6    million   was   recorded   for   severance   of   employees   and    the
closing   of   a   foreign   office   as   part   of   the   Company's    global
reorganization.

       Due   to   the   factors  discussed  above,  operating  income   in   the
third    quarter   of   1998   increased   by   $251.3   million    to    $113.4
million   from   the   operating   loss  of  $137.9   million   in   the   third
quarter   of   1997   and   increased   35%   from   the   second   quarter   of
1998.    As   a   percentage  of  sales,  operating   income   for   the   third
quarter    of   1998   increased   to   6.2%   from   (9.2%)   in   the    third
quarter of 1997 and 5.2% in the second quarter of 1998.

        Other   income,   net   includes   other   income   net   of   expenses,
such    as    interest    income    and    expense    and    foreign    exchange
transaction    gains   and   losses.    Other   income,   net    increased    to
$12.7   million   from   $5.6   million   and   $10.9   million,   respectively,
in    the    third   quarter   of   1997   and   second   quarter    of    1998,
primarily    due    to   the   additional   interest   income    generated    by
increases in cash balances and marketable securities.

       The   Company's   annualized  effective  tax  rate  was   36%   for   the
third    quarter   of   1998,   consistent   with   the   second   quarter    of
1998.    The   effective   tax  (benefit)  rate  for  the   third   quarter   of
1997   was   (19.0%),   representing   the   income   tax   benefit   from   the
net loss.

First Nine Months of 1998 Compared to First Nine Months of 1997

       For   the   first   nine  months  of  1998,  sales   increased   20%   to
$5.16    billion   from   $4.32   billion   in   the   comparable   period    of
1997.    The   increase   is   primarily   due   to   strong   consumer   demand
for   the   Company's   products  and  the  continued   growth   in   sales   of
the    Company's   portable   and   server   products.    Unit   shipments   for
the   first   nine   months   of  1998  increased   38%   to   2,390,000   units
from    1,736,000   units   in   the   comparable   period   of   1997.    AUP's
were   approximately   13%   lower   in  the   first   nine   months   of   1998
versus   the   same   period   of   1997.   Sales   in   the   Americas   region
grew   23%   versus   the   comparable  period  of   1997   to   $4.44   billion
and    unit    shipments   increased   42%.    Sales   for   the   first    nine
months   of   1998   for   the   European  region   were   $400.5   million,   a
decrease   of   14%   versus  the  first  nine  months  of   1997   while   unit
shipments   remained   flat.    Sales  in   the   Asia   Pacific   region   grew
to   $322.0   million   in  the  first  nine  months  of   1998,   an   increase
of   30%   versus   the   comparable  period  of  1997  while   unit   shipments
increased 58%.

       Gross   profit   in   the  first  nine  months  of  1998   increased   to
$1.05   billion   from   $721.4   million  in   the   first   nine   months   of
1997.    As   a   percentage  of  sales,  gross  profit  for  the   first   nine
months   of   1998   was  20.3%,  up  from  16.7%  in  the   comparable   period
of    1997.     Gross   profit   percentages   were   impacted   favorably    by
higher    margin    products   encompassed   under   new   marketing    programs
as well as declines in component costs.

       SG&A   expenses  in  the  first  nine  months  of  1998   increased   30%
to   $741.4   million  from  $570.7  million  in  the  first  nine   months   of
1997.    As   a   percentage   of   sales,  SG&A   increased   to   14.4%   from
13.2%   recorded   in  the  comparable  period  of  1997.    The   increase   in
SG&A    represents    increases   in   personnel   expenses    reflecting    the
general     growth     of     the     business    and     marketing     expenses
attributable   to   an   investment   in   the   Company's   brand    and    new
product initiatives.

        As    noted   above,   the   Company   recorded   several   nonrecurring
pretax charges totaling $113.8 million for 1997.

       Due   to   the  factors  discussed  above,  operating  income   for   the
first   nine   months   of   1998  increased  731%  to   $306.5   million   from
$36.9   million   in  the  first  nine  months  of  1997.    As   a   percentage
of   sales,   operating   income  increased   to   5.9%   from   0.9%   in   the
comparable period of 1997.

       Other   income,  net  increased  in  the  first  nine  months   of   1998
to   $32.9   million   from   $20.2  million  during   the   comparable   period
of    1997.    The   increase   results   from   additional   interest    income
generated by increased cash balances and marketable securities.

       The   Company's   annualized   effective   tax   rate   was   36.0%   for
the   first   nine   months  of  1998  compared  to  70.4%   recorded   in   the
first   nine   months   of   1997.    The   abnormally   high   1997   effective
rate   was   due   to   nondeductible   expenses   for   income   tax   purposes
resulting     from     the    write-off    of    in-process     research     and
development   from   the   acquisitions   of   ALR   and   certain   assets   of
Amiga Technologies during third quarter 1997.

Liquidity and Capital Resources

        At    September   30,   1998,   the   Company   had   cash   and    cash
equivalents    of    $871.4   million,   marketable   securities    of    $132.2
million    and   an   unsecured   committed   credit   facility   with   certain
banks   aggregating   $225  million,  consisting  of   a   revolving   line   of
credit   facility   and   a   sub-facility   for   letters   of   credit.     At
September    30,    1998,    no    amounts   were    outstanding    under    the
revolving     line    of    credit.     Approximately    $3.5    million     was
committed    to    support    outstanding    standby    letters    of    credit.
Management    believes    the    Company's   current    sources    of    working
capital,     including     amounts    available    under     existing     credit
facilities,    will   provide   adequate   flexibility   for    the    Company's
financial needs for at least the next 12 months.

       The   Company   generated  $494.7  million  in   cash   from   operations
during    the    first    nine   months   of   the   year,   including    $273.6
million    of    net    income    adjusted   for    non-cash    items.     Other
significant   factors   increasing   available   cash   include    a    decrease
in   inventory   levels   of  $51.2  million  and  an   increase   of   accounts
payable     and     other    accrued    liabilities    of    $242.8     million,
partially   offset   by   an   increase  in  accounts   receivable   and   other
assets.     The    decrease    in   inventory    levels    and    increase    in
accounts   payable   and   other   accrued  liabilities   is   attributable   to
the   Company's   increased   focus   on  working   capital   management.    The
Company   used   approximately   $136.9  million   for   the   construction   of
new    facilities,    information    systems    and    equipment    and    $93.2
million   to   purchase   investments   in   marketable   securities,   net   of
proceeds   of   securities   sold.   The  Company  continued   to   expand   the
retail   Gateway   Country  stores  with  27  new  stores   added   during   the
third quarter of 1998, bringing the total number of stores to 85.

         At     September    30,    1998,    the    Company    had     long-term
indebtedness   and   capital   lease   obligations   of   approximately    $12.1
million.     These    obligations   relate   to   the   Company's    investments
in    equipment   and   facilities.    The   Company   anticipates    that    it
will     retain    all    earnings    in    the    foreseeable    future     for
development   of   its   business   and  will   not   distribute   earnings   to
its stockholders as dividends.

New Accounting Pronouncements

       In   June   of   1998   the  Financial  Standards   Board   issued   SFAS
No.     133    "Accounting    for    Derivative    Instruments    and    Hedging
Activities"    (FAS    133)    which   is    effective    for    fiscal    years
beginning   after   June  15,  1999.   The  objective  of   the   statement   is
to    establish    accounting   and   reporting   standards    for    derivative
instruments    and    hedging   activities.    The    Company    uses    foreign
currency    forward    contracts,   a   derivative    instrument,    to    hedge
foreign    currency    transactions    and    anticipated    foreign    currency
transactions.     The   adoption   of   this   new   accounting    pronouncement
is    not    expected    to    be   material   to   the   Company's    financial
position or results of operations.

       In   1998,   the   Accounting   Standards  Committee   issued   Statement
of    Accounting    Position   ("SOP")   No.   98-1,   "Accounting    for    the
Costs    of    Computer   Software   Developed   or   Obtained   for    Internal
Use,"    which    is    effective    for   fiscal    years    beginning    after
December    15,   1998.    The   SOP   provides   guidance   on    when    costs
incurred    for    internal-use   computer   software   are    and    are    not
capitalized,   and   on   the   accounting   for   such   software    that    is
marketed.    The   Company   plans  to  adopt  the  provisions   of   this   SOP
in   1998  and  the  adoption  is  not  expected  to  have  an  impact  on   its
consolidated    financial   position,    results   of   operations    or    cash
flows.

Year 2000

The "Year 2000" issue has arisen because many existing computer
programs and chip-based embedded technology systems use only the
last two digits to refer to a year, and therefore,  do not
properly recognize a year that begins with "20" instead of the
familiar "19." If not corrected, many computer applications could
fail or create erroneous results.

State of Readiness The Company has adopted a seven-step process
toward Year 2000 readiness consisting of the following: (i)
awareness: fostering an understanding of and commitment to the
problem and its potential risks;  (ii) inventory: identifying and
locating systems and technology components that may be affected;
(iii) assessment: reviewing these components for Year 2000
compliance and assessing the scope of potential Year 2000 issues;
(iv) planning: defining the technical solutions labor and work
plans necessary for each affected system; (v)
remediation/replacement: completing the programming to upgrade or
replace the problem software or hardware; (vi) testing and
compliance validation: conducting testing followed by independent
validation by a separate internal verification team; and (vii)
implementation: placing the corrected systems and technology back
into the business environment with a management monitoring system
to ensure ongoing compliance.

The Company has grouped its systems and technology into the
following three categories for purposes of Year 2000 compliance:
(i) information resource applications and technology consisting
of enterprise-wide systems supported by the Company's centralized
information technology organization (IT);  (ii) business
processes consisting of hardware, software, and associated
computer chips as well as external vendors used in the operation
of the Company's core business functions; and (iii) building
systems consisting of non-IT equipment at properties that use
embedded computer chips such as elevators, automated room key
systems and HVAC equipment. The Company is prioritizing its
efforts based on the severity with which non compliance would
affect service, core business processes or revenues, and whether
there are viable, non-automated fallback procedures (Mission
Criticality).

As of the end of the third quarter, the Company believes the
Awareness and Inventory phases are complete for both IT systems
and building systems and 50 percent complete for business
processes. For IT systems, the Company believes the assessment,
planning and remediation/replacement phases are each over 50
percent complete with testing and compliance validation ready to
begin on numerous systems. For business processes and building
systems, the Company believes the assessment and planning are
over 25 percent complete with a substantial amount of work in
process.  The progress level for remediation/replacement and
testing and compliance validation has not yet been documented and
quantified. The Company plans to complete the
remediation/replacement and testing phases for its mission
critical IT systems by the end of the second quarter of 1999 with
the remaining half of 1999 reserved for unplanned contingencies
and compliance validation and quality assurance.  For mission
critical business processes and building systems, the same level
of completion is targeted for October 1999.

The Company has also initiated Year 2000 compliance
communications with its significant third party suppliers,
vendors and business partners. The Company is focusing its
efforts on the business interfaces most critical to its customer
service, core business processes and revenues, including those
third parties that support the most critical enterprise-wide IT
Systems, the Company's primary suppliers of non-IT products, or
provide the most critical payment processing functions. Responses
have been received from a majority of the third parties that
comprise this group.

Costs During the first nine months of 1998, the Company expensed
incremental costs of approximately $2.5 million related to the
Year 2000 remediation efforts, and has expensed $2.8 million on a
life-to-date basis.  The current total estimated cost to complete
the Year 2000 remediation efforts is from $14 to $16 million,
exclusive of upgrades to existing applications and implementation
of new systems.  Internal and external costs specifically
associated with modifying internal-use software for the Year 2000
will be charged to expense as incurred.  All of these costs are
being funded through operating cash flows.

Year 2000 Contingency Plans The Company is reviewing its existing
contingency plans for potential modification to address specific
Year 2000 issues as they arise and expects to continue this
process during the next four fiscal quarters.

Company Products with respect to PC products sold to customers,
for all the Company hardware based on the Intel family of
Pentium processors (Pentium[Registered Trademark], Pentium[Registered
Trademark] Pro, Pentium[Registered Trademark] II, Pentium [Registered
Trademark] II Xeon[Trademark] and Celeron[Trademark] processors)
and using an operating system provided by the Company, the Company
warrants to customers that such systems sold after January 1, 1997
will process dates correctly before, during, and after January 1, 2000.
This warranty applies to desktop, portable, Destination, and server
products, and it is governed by the terms and conditions outlined
in the original system warranty.  It does not include application
software, or non-Company branded external hardware peripherals such as
printers, scanners, and joysticks.  Because the company does not
control the design of these products, it cannot ensure how they
access or calculate date information in the computer.  Certain hardware
sold before January 1, 1997 will require remediation or replacement to
become Year 2000 compliant.  While the Company believes it is not
legally responsible for costs incurred by customers to become
Year 2000 Compliant or Year 2000 failures resulting from software or
non-Company branded external hardware peripherals, the Company may experience
increased customer claims as a result.  

Risks of the Company's Year 2000 Issues Based on current
information, the Company believes that the Year 2000 problem will not
have a material adverse effect on the Company, its consolidated financial
position, results of operations or cash flows.  However, there is no
assurance that Year 2000 remediation by the Company or third parties
will be properly and timely completed, and failure to do so could have
a material adverse effect on the Company, its business, results of operations,
and its financial condition, as could the potential impact of
increased customer claims.  The Company cannot predict the effects that
Year 2000 non-compliance would have on it, which would ultimately depend on
numerous uncertainties such as: (i) the factors listed above
under Costs; (ii) whether significant third parties, including suppliers,
properly and timely address the Year 2000 issue; (iii) whether broad-based or
systemic economic failures may occur, and the severity and
duration of such failures, including loss of utility and/or
telecommunications services, and errors or failures in financial
transactions or payment processing systems such as credit cards;
and (iv) whether the Company becomes the subject of litigation or
other proceedings regarding any Year 2000-related events and the
outcome of any such litigation or proceedings.

Note:  Intel and Pentium are registered trademarks, and Pentium II
Xeon and Celeron are trademarks of Intel Corporation.

Factors That May Affect Future Results

         The     above    statements    include    forward-looking    statements
based    on    current    management   expectations.    Factors    that    could
cause    future    results   to   differ   from   the   Company's   expectations
include   the   following:   growth   in   the   personal   computer   industry;
competitive     factors    and    pricing    pressures;     component     supply
shortages;    inventory    risks   due   to    shifts    in    market    demand;
changes   in   the   product,  customer  or  geographic   sales   mix   in   any
particular   period;   the   outcome   of   pending   and   future   litigation;
access    to    necessary    intellectual   property    rights;    changes    in
government    regulation;    foreign    currency    fluctuations;    risks    of
acquired     businesses;    and    general    domestic     and     international
economic conditions.

       In   addition   to   other   information  contained   in   this   Report,
the   following   factors,   among   others,  sometimes   have   affected,   and
in    the    future   could   affect,   the   Company's   actual    consolidated
financial    position,   results   of   operations   or    cash    flows,    and
could    cause    future    results   to   differ    materially    from    those
expressed   in   any   forward  looking  statement  made  by,   or   on   behalf
of the Company.

       The   Company   has   experienced,  and  may  continue   to   experience,
problems    with    respect   to   the   size   of   its    work    force    and
production     facilities    and    the    adequacy    of     its     management
information   and   other   systems,   purchasing   and   inventory    controls,
and   the   forecasting   of   component  part  needs.    These   problems   can
result    in   high   backlog   of   product   orders,   delays   in    customer
support response times and increased expense levels.

        Short    product   life   cycles   characterize   the    PC    industry,
resulting     from     rapid    changes    in    technology     and     consumer
preferences   and   declining   product   prices.    The   Company's    in-house
engineering    personnel    work   closely   with   PC    component    suppliers
and     other     technology    developers    to     evaluate     the     latest
developments    in    PC-related   technology.    There    is    no    assurance
that   the   Company  will  continue  to  have  access  to  or  the   right   to
use   new   technology   or   will   be   successful   in   incorporating   such
new technology in its products or features in a timely manner.

Item    3.     Quantitative   and   Qualitative   Disclosures    About    Market
Risk
     
     There has not been a material change in the Company's
exposure to foreign currency risks since December 31, 1997.



                         II.  OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

  (a)     Exhibits:

  Exhibit                  Description of Exhibits
    No.
    27.1                   Financial Data Schedule

  (b)     Reports on Form 8-K:

      No Reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1998.


                            SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act
of  1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                 Gateway 2000, Inc.


Date:  November 16, 1998         By: /s/ John J. Todd
                                    John J. Todd
                                    Senior Vice President, Chief
                                    Financial Officer and
                                    Treasurer (authorized
                                    officer and chief accounting
                                    officer)



  Exhibit                     INDEX TO EXHIBITS
    No.

    27.1                   Financial Data Schedule