SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549


                            FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                      EXCHANGE ACT OF 1934

           For the Fiscal Year Ended December 31, 1997

                 Commission file number 0-22784


                       GATEWAY 2000, INC.
                                
                                
                                
A Delaware Corporation                   I.R.S. Employer Number
                                                   42-1249184

                                
  610 Gateway Drive, North Sioux City, South Dakota 57049-2000
                                
                Telephone number: (605) 232-2000
                                

Securities registered pursuant to Section 12(b) of the Act:
                                
Title of each class     Name of each exchange on which registered
Common Stock, par               New York Stock Exchange
value $.01 per share

Securities registered pursuant to Section 12(g) of the Act:  None


      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  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 ___.

      Indicate  by check mark if disclosure of delinquent  filers
pursuant  to Item 405 of Regulation S-K is not contained  herein,
and will not be contained, to the best of registrant's knowledge,
in  definitive  proxy or information statements  incorporated  by
reference in Part III of this Form 10-K or any amendment to  this
Form 10-K.  [ X ]

     The  aggregate market value of the voting stock held by non-
affiliates of the registrant on March 13, 1998 (based on the last
sale price of $42 per share for the registrant's Common Stock  on
the  New York Stock Exchange as of such date) was $3,644,782,344.
At  such  date,  there were 154,857,480 shares  of  Common  Stock
outstanding.

               DOCUMENTS INCORPORATED BY REFERENCE

     Portions of Gateway's definitive proxy statement relating to
its  1998  annual meeting of stockholders to be  filed  with  the
Securities and Exchange Commission not later than 120 days  after
the  end  of  the fiscal year to which this Report  relates,  are
incorporated by reference in Part III of this Form 10-K.
                                
                             PART I

Item 1.  Business

General

     Gateway   2000,  Inc.  and  its  subsidiaries  (collectively
"Gateway"  or  the  "Company") is a leading  direct  marketer  of
personal  computers  ("PCs") and related products  and  services.
Gateway  develops, manufactures, markets, and  supports  a  broad
line  of  desktop  and portable PCs, digital media  (convergence)
PCs,  servers,  workstations  and  PC-related  products  used  by
individuals,   families,  businesses,  government  agencies   and
educational institutions.  In November 1997, Gateway  became  the
first major PC manufacturer to offer nationwide Internet provider
service  directly to its customers through gateway.netSM internet
services.   The  Company  believes  it  is  one  of  the  leading
suppliers of PCs to the U.S. consumer market, with a market share
of  approximately  12%  in  the 1997 fourth  quarter.   Gateway's
strategy  is  to  deliver the best value  to  it's  customers  by
offering   quality,  high-performance  PCs  and  other   products
employing  the  latest technology at competitive  prices  and  by
providing  outstanding service and support.  Internet  users  can
access information about Gateway and its products and services at
http://www.gateway.com.

     Gateway was incorporated in Iowa on August 15, 1986,  merged
into  a  South  Dakota  corporation of the  same  name  effective
December 29, 1989, and merged into a Delaware corporation of  the
same name effective February 20, 1991.  In December 1993, Gateway
completed  its  initial public offering of Common Stock  and  was
listed on NASDAQ.  On May 22, 1997, Gateway moved to the New York
Stock Exchange, and began trading under the symbol GTW.

Strategy

     Gateway's strategy is comprised of the following:

     Direct  Marketing. Gateway markets its products directly  to
PC  customers,  primarily by placing advertisements  in  computer
trade  magazines,  newspapers, selected family-oriented  business
and    travel    publications   and   its    internet    website,
http://www.gateway.com.   Gateway  also   conducts   a   national
consumer-oriented television advertising campaign.   The  Company
has  expanded  its marketing operations through  the  opening  of
Gateway CountrySM stores including 22 stores opened in the fourth
quarter  of  1997.   The  Gateway Country  store  concept  allows
customers  to  operate and evaluate the entire  line  of  Gateway
products.   Unlike traditional retail channels,  these  locations
maintain no inventory of finished systems.  At December 31, 1997,
Gateway operated 37 Gateway Country stores.
     
     As  compared with more traditional channels of distribution,
the  direct  approach  to  the  PC marketplace  provides  several
advantages.  First, Gateway believes it can consistently maintain
competitive  product pricing by avoiding the  additional  markups
and the inventory and occupancy costs associated with traditional
retail  channels.   Second,  by avoiding  the  higher  levels  of
inventory  required  in  traditional  retail  channels,   Gateway
attempts   to  reduce  its  exposure  to  the  risk  of   product
obsolescence and improve its flexibility in offering new products
to  customers  on a timely basis.  Third, Gateway  believes  that
working directly with PC customers promotes customer loyalty  and
brand  awareness.  For example, Gateway believes that  over  one-
half  of  its  business  is attributable to  repeat  or  referral
customers.

     Quality  Products.  Gateway believes that  as  PC  customers
have   gained  greater  knowledge  and  sophistication  in  their
purchasing   decisions,  quality  and  reliability  have   become
increasingly  important decision-making factors.   Gateway  works
closely  with  its suppliers to develop high-quality  components,
manufactured  to  Gateway's specifications.  In  addition,  every
Gateway 2000 PC undergoes extensive quality control testing.

     Latest Technology.  Gateway works directly with a wide range
of  suppliers  to evaluate the latest developments in  PC-related
technology.  Gateway believes that these relationships,  together
with   market  information  obtained  from  its  direct  customer
relationships, have enabled it to bring to the market on a timely
basis  products  with broad market demand.   The  flexibility  of
build-to-order manufacturing, low inventory and short  production
lead  times  allow  Gateway  to  rapidly  introduce  and  deliver
appealing new products and software.

     Gateway is generally one of the earliest PC manufacturers to
incorporate  Intel  Corporation's latest PC microprocessors  into
its  product line, most recently including the Pentium  IIr.   At
the  end  of the fourth quarter of 1997, Gateway was an  industry
leader in shipments of Pentium IIr based PCs.
     
     In July 1997, Gateway acquired Advanced Logic Research, Inc.
(ALR).   ALR  designs  and  manufactures multiprocessor  servers,
computer workstations and desktop PCs.  ALR operates as a wholly-
owned  subsidiary of Gateway and continues to market its products
under the ALR brand through its established worldwide network  of
resellers,  system  integrators,  dealers  and  distributors  and
selected  original equipment manufacturers.  As a result  of  the
technology  acquired  with  the  ALR  acquisition,  Gateway   has
introduced a number of server and high-end desktop products under
its  own brand.  Gateway's server products utilize ALR's four-way
and six-way symmetrical multiprocessing technology.

     For  a discussion of certain risks associated with Gateway's
operations,   see  "Management's  Discussion  and   Analysis   of
Financial Condition and Results of Operations - Factors That  May
Affect Future Results" beginning on page 15 of this Report.

     Quality   Service  and  Support.   Gateway   believes   that
customers  judge  quality  by  evaluating  the  performance   and
reliability  of  a  company's products, as well  as  a  company's
ability to provide comprehensive service and support for its PCs.
To provide superior service and support to its customers, Gateway
utilizes   more   than  4,700  customer  and  technical   support
representatives specifically trained to assist customers with the
resolution of technical questions relating to Gateway's products.
Gateway maintains separate technical support organizations in the
United States, Europe, Japan, Australia, and Malaysia.

     Competitive  Pricing.    Gateway  offers  its  products   at
competitive  prices.  To profitably deliver quality  products  at
competitive  prices,  Gateway  seeks  to  maintain   a   low-cost
operating  structure.  First, in addition to the cost  advantages
of   marketing  its  products  directly  to  end  users,  Gateway
endeavors to minimize overhead expenses.  For example, by  virtue
of its locations in South Dakota, Virginia, Ireland and Malaysia,
Gateway  believes that it has been able to lower expenses because
of  the  relatively lower costs associated with  the  facilities,
work forces and taxes in these locations.  Second, Gateway's  in-
house engineering personnel work closely with component suppliers
in  developing  and  implementing new  technology,  reducing  the
investment  usually  associated  with  a  traditional,   in-house
research  and  development group.  Finally, Gateway believes  its
large volume of business affords it certain purchasing powers and
economies  of scale which lower its unit costs and contribute  to
operating efficiencies.

     Growth  Initiatives.  The growth in Gateway's net sales  and
earnings to date has resulted primarily from the sale of  desktop
PCs  to individuals, small businesses and corporate, governmental
and institutional customers in the U.S. market.  Also, growth  in
net  sales  of  Gateway's portable products  has  continued  from
previous  years.   Gateway has continued to  expand  its  product
line,  including  the  NS-Series  servers  being  introduced   in
Gateway's  product  line for the first  time  in  1997.   Gateway
believes  that most of its continued growth will come  from  four
areas:  the  domestic consumer market, including  the  developing
market for family-use PCs; the small to medium-size business; the
further  development  of major account relationships  (generally,
Fortune  1000  companies, governmental entities  and  educational
institutions);  and the continued expansion of its  international
operations.   Also, Gateway has continued its  efforts  to  reach
these  markets  through its development of the Gateway  CountrySM
stores,  allowing direct interaction with retail  customers,  and
the   enhancement  of  its  outside  sales  force  which   serves
businesses, government agencies and educational institutions.  By
the  end  of 1997, Gateway had opened 37 stores.  Gateway expects
to  more  than double the total number of stores by  the  end  of
1998.
     
Geographic Areas of Operation

     Gateway  has  organized  its global  operations  into  three
operating regions.  The Americas region principally includes  the
United  States,  Canada, and South America, and is  managed  from
North  Sioux  City,  South Dakota.  The Europe  region  which  is
managed from Dublin, Ireland includes the European countries  and
certain  countries in the Middle East and in  Africa.   The  Asia
Pacific   region   includes  operations  in   Japan,   Australia,
Singapore,  Malaysia  and  Hong Kong.   A  summary  of  operating
results for Gateway's industry segment, broken down by geographic
area,  is  incorporated herein by reference to  Note  12  of  the
consolidated  financial statements included on page  34  of  this
Report.
     
Products

     Gateway  offers  a broad line of desktop and  portable  PCs,
digital  media  (convergence)  PCs,  servers,  workstations,  and
access  to  the  Internet, as well as peripheral products,  third
party software, and service and support programs.  GatewayTM  PCs
are custom-configured with a choice of microprocessors of varying
clock  speeds,  memory and storage capacities, as well  as  other
options, all as specified by the customer.  Additionally, PCs are
available  with  a  wide  variety of  operating  and  application
software.

     Desktop  PCs.  Gateway has three lines of desktop PCs.   The
Gateway  G-Series of desktop PCs is primarily designed  for  home
users and typically includes CD-ROM, graphics, and audio systems.
The  E-Series and GP-Series lines of desktop PCs are designed for
businesses   of   all  sizes,  including  those  with   networked
environments.  All desktop PCs utilize Intel Pentiumr  processors
and  are  available with MMX technology.  During the last quarter
of  1997,  Pentium II processor - based desktop systems accounted
for 43% of desk-top shipments.

     Portable  PCs.   Gateway Solo portable PCs provide  portable
computing capabilities for users who operate in both a mobile and
networked  environment.  The systems can be designed  for  either
home or business use and are available with docking stations  and
various  multimedia applications.  Portable systems also  utilize
Intel  Pentium processors and are available with MMX  technology.
Portables   are   a  fast  growing  segment  of   the   business,
representing approximately 11% of sales in 1997.

     Digital    Media    (Convergence)   PCs.    Digital    media
(convergence)   PCs  combine  home  entertainment   or   business
conference room and personal computing capabilities into a single
product.   These  systems  typically  can  include  large   color
monitors, wireless keyboard and pointing devices, CD and  digital
video disc (DVD) ROM drives, a TV/VGA video card, a high fidelity
audio card, and a communication center with a high speed internet
connection.  Gateway is a market leader in this product line.

     Servers.   The  NS-Series  of network  servers  can  meet  a
variety  of  server  applications within  a  networked  computing
environment  and  can  be designed with up to  six  Pentium  Pror
processors  in  a rack mountable or free standing  configuration.
The  NS  Rack Mount provides centralized computing in  a  single,
space-saving location that offers ease of serviceability.  The NS-
Series  of  products also includes the NS-Data  Station  line  of
external  storage sub-systems, and a series of rack options  such
as  Rack  Cabinets, Quick Hot Swap drawers, and Tape Backup  Unit
drawers.
     
     gateway.netSM  Internet service.  In November 1997,  Gateway
became  the  first  major  PC manufacturer  to  offer  nationwide
Internet provider service directly to its customers.  gateway.net
Internet service offers electronic mail, Internet access, and  an
array  of  news, entertainment, family-oriented topics,  weather,
sports, Internet tips and tutorials.

     Peripheral  Products and Software.  Gateway  also  offers  a
variety  of  additional  products including  monitors,  printers,
fax/modems, CD-ROM drives, external storage devices, and  popular
third party software titles.
     
 Product Development
     
     Gateway's   expenditures   on  research,   development   and
engineering in each of the last three years were less than 1%  of
net sales.  Gateway maintains close and cooperative relationships
with  many of its suppliers and with other technology developers.
These  relationships  and Gateway's own  engineering  staff  have
enabled  Gateway  to  evaluate  the  latest  developments  in  PC
technology and to quickly introduce new products and new  product
features  to  the  market.   Gateway  believes  that  its  strong
relationships  with its suppliers will continue to  give  Gateway
access  to  new technology and enhance its ability to  bring  the
latest technology to market on a timely basis.  In addition,  ALR
maintains a research and development staff.  Direct relationships
with  its customers also enable Gateway to obtain valuable market
information, which it uses to assist in developing its  offerings
of new products and product features.

Manufacturing and Materials

     Gateway  has designed its manufacturing process  to  provide
products custom-configured to conform to customer specifications.
Gateway  uses production teams to assemble its desktop  PCs  with
each  member  of  a production team trained to do several  tasks,
increasing  flexibility  and efficiency.   Third-party  suppliers
manufacture  the base configuration for portable PCs and  Gateway
completes   final  configuration.   Gateway's  production   teams
perform  quality control tests on each PC, and Gateway's  quality
assurance staff inspects samples of completed PCs to ensure  that
the  PCs  meet  Gateway's quality specifications  and  applicable
regulatory  requirements.   Each PC  is  shipped  from  Gateway's
manufacturing facilities ready-for-use, with certain  application
software  already installed. Replacement parts are also generally
shipped directly from Gateway to its customers.

     Although  Gateway designs and contracts for the  manufacture
of components according to Gateway's specifications, Gateway does
not  itself manufacture any components used in its PCs.   Gateway
attempts  to use parts and components available from, and  cross-
compatible  between, multiple suppliers.  In some  circumstances,
however,  Gateway maintains single-source supplier  relationships
due   to  technology,  availability,  price,  quality  or   other
considerations.
     
     Gateway's   desktop  and  portable  computer   manufacturing
operations in North Sioux City, South Dakota, Hampton,  Virginia,
Singapore  and Malacca, Malaysia have been assessed and certified
as meeting the requirements of the International Organization for
Standardization  (ISO)  9002.  ISO 9002 certification  recognizes
Gateway's  compliance  with international standards  for  quality
assurance.

     In  general, Gateway does not enter into long-term contracts
for the supply of components used in the manufacture of GatewayTM
PCs.    Gateway  believes  that  short-term  supply  arrangements
generally  allow  it  to  respond  more  effectively   to   rapid
technological  change and consumer preferences.  In  the  future,
Gateway  may  enter  into  long-term  supply  arrangements   when
management believes it is prudent.

     Occasional   disruptions  to  Gateway's  normal   production
schedules have been, and may continue to be, experienced  because
of  suppliers'  failures  to meet component  delivery  schedules.
These disruptions can result in manufacturing inefficiencies  and
may  temporarily  increase Gateway's backlog.  Gateway  tries  to
reduce   such   disruptions  by  regularly  evaluating   supplier
performance  and  seeking  alternate or additional  suppliers  as
necessary.

     Gateway requires a high volume of quality components for the
manufacture  of its products.  The computer industry periodically
experiences shortages of certain components, such as memory,  CD-
ROM  drives  or  video  cards.  An  industry  shortage  or  other
constraint of any key component could adversely affect  Gateway's
ability  to  deliver products on schedule or to realize  expected
gross margins.

Marketing and Sales

      Gateway is among the industry leaders in PC sales  to  home
users  and  small and medium businesses.  In 1997,  approximately
35%  of total Gateway sales were to U.S. home users, 30% to  U.S.
businesses,  20% to U.S. educational institutions and government,
and 15% of total sales were international.

     Gateway  markets  its  products directly  to  PC  customers,
primarily  by placing advertisements in computer trade magazines,
newspapers,   selected  family-oriented   business   and   travel
publications  and  its  internet website, http://www.gateway.com.
These  advertisements include product information  and  Gateway's
toll-free  telephone  numbers.  Gateway  also  conducts  national
consumer-oriented  television  advertising  campaigns.    Gateway
believes  its  creative marketing, including use  of  its  famous
trademarked  "BLACK AND WHITE SPOT" Design on product  packaging,
has  helped  generate  significant brand awareness  and  a  loyal
customer base.

     As  of  December  31, 1997, a sales force  of  approximately
2,400  Company  employees  sold  Company  products  directly   to
customers over the telephone.  Customers can order products  over
the telephone up to fifteen hours a day and seven days a week  in
the  U.S.  and  six days a week elsewhere in the  world.   As  of
December  31,  1997,  Gateway utilized over  4,700  customer  and
technical support representatives providing comprehensive service
and  support.   Gateway's sales force and customer service  staff
have  continued  to expand to meet increased demand  for  Gateway
products   and  support  services.   For  example,  Gateway   has
increased  its  major  accounts sales force  in  support  of  its
Fortune  1000  customer  base.  Gateway  has  also  expanded  its
Gateway  CountrySM  stores  to 37 stores  throughout  20  states,
allowing customers direct interaction with sales representatives.

     In   April   1996,  Gateway  became  the  first   major   PC
manufacturer   to  provide  consumers  the  ability   to   custom
configure,  order and pay for a personal computer via  the  world
wide web.  During the peak fourth quarter holiday season in 1997,
sales over the Company's web site exceeded $4.0 million per day.
     
     Over   50%   of  Gateway's  business  is  believed   to   be
attributable to either previous buyers of GatewayTM  PCs  or  new
customers referred by previous buyers.  Gateway has sold over 8.3
million  PCs to date, and maintains a database of its  customers.
To  capitalize on this customer database, Gateway has  introduced
innovative  means of marketing and communication.  These  include
the Gateway Moola Mastercardr credit card that gives consumers  a
rebate  applicable  toward  future  Gateway  purchases  and   the
quarterly  GW2k:  Gateway  Magazine.  In  October  1995,  Gateway
opened   a   web   site   on  the  Internet,   at   the   address
http://www.gateway.com.   The web  site  and  the  GW2k:  Gateway
Magazine  offer  information  on  Company  events,  new   product
offerings  and  technical support advice.  In  addition,  regular
surveys   of  Gateway's  customers  also  give  Gateway  valuable
marketing, service and product information.

Product Warranties and Technical Support

     Gateway  believes  its product warranties  and  support  are
essential  to  achieving  customer satisfaction  and  maintaining
Gateway's   image.    The  key  elements  of  Gateway's   product
warranties  and technical support program, including the  Gateway
GoldSM service and support program, are as follows:

     30-Day  Limited  Money-Back Guarantee.  In general,  Gateway
provides  a  30-day  money-back guarantee for  customer  returns.
Shipping charges to and from the customer are non-refundable.

     Limited  Warranty.   Gateway provides a  three-year  limited
warranty  for  desktop PCs, and a one-year limited  warranty  for
portable PCs.  The warranty period begins at the delivery date of
the product and covers repairs or replacements for any defect  in
either  workmanship or components.  Gateway will test and ship  a
new  or  remanufactured replacement part, which the customer  can
then  install.   Technicians are specifically trained  to  assist
customers  in the installation of replacement parts via telephone
support.

        On-Board Diagnostic Tools.  During 1998, Gateway expects to
launch the HelpSpotTM software tools, which will provide customers
with a suite of diagnostic tools to diagnose system problems.  The
HelpSpot software tools also include tutorial information to assist
customers with system operations.

     Toll-Free  Telephone Technical Support.  Gateway offers  its
customers  telephone access to technical support services  (toll-
free  in  the U.S., Australia, Austria, Belgium, France, Germany,
Ireland,  Japan,  Luxembourg, Switzerland,  the  United  Kingdom,
Sweden, Malaysia and the Netherlands).  Gateway's technicians are
specifically  trained to assist customers with the resolution  of
technical  questions  related  to  Gateway's  products.   Gateway
provides 24 hours per day, seven days per week telephone  support
in  the  U.S. and in Japan.  In addition, technicians have access
to  a  technical  laboratory which allows them to  replicate  and
attempt  to  solve specific customer problems.   Each  technician
initially receives 160 hours of classroom diagnostic training and
receives  additional  classroom  training  as  new  products  are
introduced.   Gateway  also employs a more experienced  technical
staff  whose primary purpose is to assist the technicians on  the
telephone,   answer  complex  questions  and  provide  on-the-job
training.   Gateway  utilizes an interactive response  system  to
provide  recorded answers to the questions most frequently  asked
by customers.

     Technical  Support Via E-Mail and Fax.  In addition  to  the
toll-free  telephone  support,  Gateway's  customers   may   send
questions  regarding Gateway's products via  e-mail  or  fax  and
receive  assistance  from Gateway's technicians.   Customers  may
also  use a touch tone telephone to obtain automatic fax delivery
of   any   of  approximately  150  documents  containing  various
technical information with regard to Gateway's products.

     Web Site: Bulletin Board Support.  Gateway has a website  on
the  Internet which, among other things, allows users  to  access
technical  support information with regard to Gateway's products.
Gateway  also  offers  its  customers  free  membership  to   its
electronic bulletin board service.  This service may be  used  to
obtain  technical  advice,  and the website  and  the  electronic
bulletin  board  service permit users to  correspond  with  other
Gateway  PC  users and download selected software.  In  addition,
Gateway's technicians are responsible for supporting customers on
various other websites and bulletin board systems.

     On-Site Repair Service.  On-site repair service is available
at   Gateway's  discretion  through  independent  contractors  in
Gateway's principal markets for desktop PCs.

     Gateway  Service Options.  Gateway offers several  fee-based
service  options to give customers the flexibility  to  customize
our  services to their needs.  Gateway GoldSM Premium service and
support  provides two additional years of onsite service as  well
as priority access to technical support professionals for desktop
PCs.   For portable PCs, the extended service option provides  an
additional  two years of parts replacement coverage  as  well  as
priority  access  to  technical  support  professionals.   Custom
Integration  Services (CIS) allows customers to custom  configure
their systems with non-Gateway standard components, software, and
services.   In addition, software tutorial services are available
through an independent supplier.

Patents, Trademarks and Licenses

     The  Company holds several U.S. and foreign patents and  has
various  U.S.  and  foreign  patent  applications  pending.    In
addition,  Gateway works closely with PC component suppliers  and
other  technology  developers  to  stay  abreast  of  the  latest
developments  in  PC  technology.  Where necessary,  Gateway  has
obtained patent licenses for certain technologies, some of  which
require significant royalty payments.  Beginning in 1995, Gateway
began  to  emphasize  in-house patent  generation  and  strategic
acquisition of patents.  While Gateway does not believe that  its
continued  success  will  depend  upon  technology  patented   or
acquired by Gateway, there can be no assurance that Gateway  will
continue to have access to existing or new third-party technology
for use in its products.  If Gateway or its suppliers were unable
to  obtain  licenses  necessary to use  protected  technology  in
Gateway's products on commercially reasonable terms, Gateway  may
be   forced   to   market  products  without  certain   desirable
technological  features.  Gateway could  also  incur  substantial
costs  to  redesign its products around other parties'  protected
technology or to defend patent or copyright infringement  actions
against Gateway.

     Gateway  owns  and  uses a number of  trademarks  on  or  in
connection with its products, including AnyKey, "BLACK AND  WHITE
SPOT"  Design, CrystalScan, Destination, Family PC, Gateway 2000,
Gateway  Gold, "G" Design, Telepath, Gateway Solo,  Vivitron  and
"You've  Got  a Friend in the Business", among others.   Many  of
these  trademarks are registered.  Gateway believes  the  GATEWAY
2000 and the famous "BLACK AND WHITE SPOT" design trademarks have
strong  brand  name recognition in the United States  marketplace
and plans to develop similar recognition internationally.

     Because software used on Company-manufactured PCs may not be
Company-owned,  Gateway has entered into  software  licensing  or
cross-licensing   arrangements  with   a   number   of   software
developers,   including  Microsoft  Corporation.   For   example,
Gateway  has licenses with Microsoft Corporation for Windows  95,
Windows,  MS-DOS  and Microsoft Office software  products,  among
others.

Competition

     The  PC  industry  is  highly competitive,  especially  with
respect  to  pricing  and the introduction of  new  products  and
product  features.   Gateway competes  primarily  by  adding  new
performance  features to products while minimizing  corresponding
price  increases.  Timely introduction of new products or product
features by Gateway cannot be guaranteed.  Likewise, no assurance
can  be  given that Gateway will continue to compete successfully
by  adding  new  features to its products  without  corresponding
price  increases.   In  recent years  Gateway  and  many  of  its
competitors  have regularly lowered prices, and  Gateway  expects
these  pricing  pressures to continue.   If  cost  reductions  or
changes  in  product mix do not mitigate these pricing pressures,
these  competitive  price  pressures could  substantially  reduce
profits.

     Gateway  competes  with companies who  sell  their  products
primarily  through  direct  marketing  channels,  such  as   Dell
Computer  Corporation and Micron Electronics, Inc.  In  addition,
Gateway  competes directly and indirectly with PC  manufacturers,
such  as  International  Business  Machines  Corporation,  Compaq
Computer  Corporation, Packard Bell Electronics,  Inc.,  Hewlett-
Packard  Company  and  Apple  Computer,  Inc.   In  addition   to
utilizing their own direct sales forces, these competitors market
their  products  through national and regional  distributors  and
dealers; distribution channels in which Gateway generally has not
participated other than through its ALR subsidiary.

     Competitive  factors  in  Gateway's markets  include  price,
availability of new technology, variety of products and  features
offered,   availability  of  peripheral  products  and  software,
marketing  and  sales capability, service and  support.   Gateway
believes  it  competes favorably with respect to  each  of  these
factors.

Seasonality

     The   computer  industry  generally  has  been  subject   to
seasonality  and to significant quarterly and annual fluctuations
in  operating results, and Gateway's operating results have  been
subject  to  such fluctuations.  Fluctuations can result  from  a
wide  variety  of factors affecting Gateway and its  competitors.
These  factors include new product developments or introductions,
availability  of components, changes in product mix  and  pricing
and product reviews and other media coverage.  Gateway's business
is  also  sensitive  to the spending patterns of  its  customers,
which  in  turn  are  subject to prevailing economic  conditions.
Historically,  Gateway's sales have increased in  the  third  and
fourth  quarters  due,  in  part, to back-to-school  and  holiday
spending.

International Operations

     Through  its wholly owned subsidiaries, Gateway 2000 Ireland
Limited   and   Gateway   2000  Europe  (collectively,   "Gateway
Ireland"),   Gateway  opened  a  sales,  service  and  production
facility  in  Dublin, Ireland on October 1,  1993.   Since  then,
Gateway  has  expanded its operations and facilities  into  other
European countries and currently has showrooms in London,  Paris,
Munich,  Cologne, Stockholm and Amsterdam and sales  and  support
facilities in Germany and the United Kingdom.  In the  last  half
of  1995, Gateway entered the Asia Pacific region with sales  and
support  facilities  in  Japan, showrooms  in  Tokyo,  Melbourne,
Brisbane   and  Sydney,  a  manufacturing  facility  in  Malacca,
Malaysia  and  the acquisition of the business and  substantially
all  of the assets of Osborne Computer Corporation, an Australian
PC   maker.   During  1997,  showrooms  were  opened  in   Perth,
Australia;  Auckland,  New Zealand; and Kuala  Lumpur,  Malaysia.
Gateway  also expanded in Kuala Lumpur with a new call center  to
handle  the  direct sales activities of Malaysia,  Singapore  and
Hong  Kong  as  well as customer support activities.   A  Gateway
Country SM store was introduced in Osaka, Japan during 1997, with
another store in Nagoya to become functional in June 1998.

     Gateway uses either direct selling or distributors to market
PCs   in   foreign   countries,  depending  on   each   country's
infrastructure,  consumer  preferences,  language  and   culture.
While  Gateway's  international operations have increased  market
share to date, there can be no assurance that Gateway's expansion
into  international  markets  will  be  successful.   Failure  of
Gateway   to   achieve   or  maintain  successful   international
operations  could  materially  and  adversely  affect   Gateway's
business,   consolidated  financial  position   or   results   of
operations.

     In  addition  to the challenges to Gateway of  managing  the
potential  growth of its international operations,  international
expansion  involves  additional business risks  such  as  foreign
currency   fluctuation,  government  regulation,  liability   for
foreign  taxes  and  product  sales,  and  delivery  and  support
logistics.    There  can  be  no  assurance  that  Gateway   will
effectively manage these additional risks.

Government Regulation

     Gateway's PCs must meet standards established by the Federal
Communications   Commission,  and  similar  agencies   in   other
countries,  for  radio  frequency  emissions  and  must   receive
appropriate  certification prior to being shipped.   A  delay  or
inability  to  obtain certification may delay or prevent  Gateway
from  introducing  new products or features and  therefore  could
materially  and adversely affect Gateway's business, consolidated
financial position, results of operations or cash flows.
     
     In  addition,  Gateway's  advertising,  shipping  and  other
operations are subject to state regulations, regulations  of  the
Federal  Trade Commission and the U.S. Department of Commerce  in
the  U.S., and similar foreign agencies in foreign jurisdictions.
Even   inadvertent  or  sporadic  failure  to  comply  with  such
regulations can result in significant fines, penalties and forced
rebates levied against Gateway or special restrictions placed  on
Gateway's  ability to ship product overseas.  While  Gateway  has
not  been  subject  to any significant enforcement  penalties  to
date,  and  while  Gateway continues to use its best  efforts  to
comply  with  all  applicable foreign and  domestic  governmental
regulations,  Gateway  does  have matters  pending  before  these
agencies  and  accordingly,  there  can  be  no  assurance   that
significant penalties will not be levied against Gateway  in  the
future.

Employees

     As  of  December 31, 1997, Gateway had approximately  13,300
full-time employees, of which 10,600 were in the U.S., 1,600 were
in Europe and 1,100 were in other foreign countries.  No employee
of  Gateway  is  represented by a labor union.  Gateway  believes
employee relations are generally good.

Backlog

      As  of  December  31, 1997, backlog was approximately  $135
million,  compared with backlog of approximately $110 million  at
the  end  of  fiscal  1996.  The Company does  not  believe  that
backlog  is a meaningful indicator of sales that can be  expected
for any period, and there can be no assurance that the backlog at
any  point  in  time will translate into sales in any  subsequent
period, particularly in light of the Company's policy of allowing
customers   to   cancel  or  reschedule  orders   under   certain
circumstances.

Customers

     No customer accounted for 10% or more of Gateway's sales in
1997.

Item 2. Properties

     Gateway  owns 111 acres of land and facilities with a  total
of  856,800  square  feet  of space in North  Sioux  City,  South
Dakota.    These  facilities  house  Gateway's  headquarters,   a
production  facility,  a customer sales  and  support  center,  a
training  center  and  warehouse  space.   Gateway  also   leases
facilities with a total of 82,000 square feet of space  in  North
Sioux  City,  South  Dakota which are used for manufacturing  and
warehouse   space.   Gateway  leases  162,700  square   feet   in
Vermillion, South Dakota used for customer service and  warehouse
space.

     Gateway owns facilities with a total of 218,000 square  feet
of space in Sioux Falls, South Dakota.  These facilities serve as
a  base  for  the sale and fulfillment of orders  for  add-on  PC
components,   the  receipt  of  returned  merchandise   and   the
fulfillment  of  orders for customer replacement parts.   Gateway
leases  182,000  square feet in Sioux Falls  for  remanufacturing
operations.

     Gateway owns a facility with 208,400 square feet of space in
Kansas  City, Missouri and Kansas City, Kansas.  The facility  is
used for a customer sales and support center.

     Gateway owns facilities with a total of 424,000 square  feet
of  space  in Hampton, Virginia.  These facilities are  used  for
manufacturing,  customer support, and warehouse  space.   Gateway
leases  facilities in Irvine, California totaling 115,000  square
feet.    The  facilities  are  used  for  manufacturing,   sales,
warehouse,   and  office  space.  Gateway  also  leases   Gateway
CountrySM store space in 37 cities located in 20 states, totaling
377,900 square feet.
     
     Gateway  has purchased 35 acres of land in Salt  Lake  City,
Utah  and  is currently constructing a facility to house  another
manufacturing plant.  Gateway has also purchased 9 acres of  land
and a 50,000 square foot facility in Rio Rancho, New Mexico to be
used   as  a  customer  support  center.   In  Colorado  Springs,
Colorado, Gateway has leased a 50,000 square foot facility to  be
used as a customer support center.

     Gateway's European operations are based in Dublin,  Ireland,
where  Gateway owns a 310,000 square foot facility.  The facility
houses  Gateway's  European  headquarters,  production  facility,
customer  sales  and  support  center  and  warehouse  space.  In
Liederbach,  Germany, Gateway leases a facility used  for  office
and  warehouse  space.   Gateway also leases  showroom  space  in
London, Paris, Munich, Cologne, Stockholm, and Amsterdam.

     In  Malacca,  Malaysia, Gateway owns a 187,200  square  foot
manufacturing  facility  which  was  opened  to  serve  Gateway's
markets  in  the  Asia  Pacific region.  Gateway  also  leases  a
showroom  and  call center space in Kuala Lumpur.  In  Australia,
Gateway  leases  a  57,000  square-foot  sales  and  distribution
facility in Sydney.  Additionally, Gateway leases showroom  space
in  Brisbane,  Melbourne and Sydney.  In  Japan,  Gateway  leases
facilities with 80,900 square feet in Yokohama and Tokyo used for
a customer sales and support center and warehouse space.

Gateway  also  leases  showroom space in  Tokyo  and  Osaka.   In
Singapore,  Gateway  leases a total  of  32,900  square  feet  of
facilities for office, manufacturing, and warehouse space.

Item 3.  Legal Proceedings

     Gateway  is  a  party to various lawsuits and administrative
proceedings  arising  in  the ordinary course  of  its  business.
Gateway 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.   Gateway's  management
believes  that  the ultimate resolution of such  pending  matters
will  not  materially  and adversely affect  Gateway's  business,
consolidated  financial position, results of operations  or  cash
flows.

Item 4.  Submission of Matters to a Vote of Security Holders

Not applicable.
                             PART II

Item 5.  Market for Registrant's Common Equity and Related
Stockholder Matters

Market Information

     As  of May 22, 1997, the Common Stock was quoted on the  New
York  Stock Exchange under the trading symbol "GTW".    Prior  to
May  22, 1997, the Common Stock was quoted on the NASDAQ National
Market under the trading symbol "GATE".  The following table sets
forth the quarterly high and low price per share information  for
the  Common Stock as quoted at the close of trading on such  date
in 1996 and 1997 and as adjusted for a two-for-one stock split on
June 16, 1997:
     
                                High                 Low
1996:
        1st quarter           $ 16.13             $  9.00
        2nd quarter           $ 20.75             $ 13.63
        3rd quarter           $ 25.07             $ 13.88
        4th quarter           $ 33.13             $ 22.32
          
          
1997:
        1st quarter           $ 32.63             $ 23.81
        2nd quarter           $ 37.38             $ 26.19
        3rd quarter           $ 44.75             $ 31.50
        4th quarter           $ 36.13             $ 25.13

Holders of Record

     As  of March 13, 1998, there were 4,543 holders of record of
the Common Stock.  There were no issued and outstanding shares of
the  Class  A Common Stock as of such date.  The Class  A  Common
Stock  is  non-voting  except on matters for  which  the  General
Corporation Law of the State of Delaware requires class voting.

Dividends

     Gateway management believes the best use of retained
earnings is to fund internal growth.  As a result, Gateway has
not declared any cash dividends on Common Stock since it was
first publicly registered and does not anticipate paying any cash
dividends in the foreseeable future.

Item 6.  Selected Consolidated Financial Data

     The   following  historical  data  were  derived  from   the
Company's  consolidated  financial statements,  which  have  been
audited  by  Coopers  & Lybrand L.L.P., independent  accountants.
This  financial  data  should be read  in  conjunction  with  the
consolidated financial statements and notes thereto beginning  on
page  19  of  this  Report and in conjunction with  "Management's
Discussion  and  Analysis of Financial Condition and  Results  of
Operations" beginning on page 11 of this Report.  The information
below  is  not  necessarily indicative of the results  of  future
operations.

<TABLE>
                             Year Ended December 31,
<CAPTION>
                                        
                         1993         1994       1995        1996         1997
                        (in thousands, except per share data)

     Consolidated Statements of Operations Data:
<S>                    <C>               <C>            <C>               <C>             <C>
Net sales              $1,731,664        $2,701,200     $3,676,328        $5,035,228      $6,293,680
Cost of goods sold      1,460,842         2,343,698      3,070,234         4,099,073       5,217,239
   Gross profit           270,822           357,502        606,094           936,155       1,076,441
Selling, general and                                                                                
  administrative                                           357,086           580,061         786,168
  expenses                121,682           216,505
Nonrecurring                                                                                 113,842
expenses                        -                 -              -                 -
Operating income          149,140           140,997        249,008           356,094         176,431
Other income, net           4,848             5,106         13,085            26,622          27,189
  Income before                                                                                     
    income taxes          153,988           146,103        262,093           382,716         203,620
Provision for actual                                                                                
  and pro forma                                                              132,037                
  income taxes             53,896            50,130         89,112                            93,823
Net income and pro                                                                                  
  forma net income      $ 100,092         $  95,973     $  172,981        $  250,679     $   109,797
Net income and pro                                                                                  
  forma Net income
  per share:
     Basic             $      .82     $      .66      $     1.19        $     1.64        $       .71
     Diluted           $      .71     $      .61      $     1.09        $     1.60        $       .70
Weighted average                                                                                    
 shares outstanding:
     Basic                122,504           144,768        145,256           152,745         153,840
     Diluted              141,907           157,313        157,988           156,237         156,201
</TABLE>
<TABLE>
<CAPTION>
                                        
                                  December 31,
                                        
                           1993       1994       1995          1996
             1997
                                          (in thousands)
     Consolidated Balance Sheet Data:

 <S>                         <C>          <C>            <C>              <C>           <C>
 Current assets              $ 500,520    $  654,160     $  866,189       $1,318,342    $ 1,544,683
 Total assets                $ 564,281    $  770,579     $1,124,011       $1,673,411    $ 2,039,271
 Current liabilities         $ 254,844    $  348,875     $  525,291       $  799,769    $ 1,003,906
 Long-term                                                                                         
 obligations,                                                                                      
   net of current            $  29,145    $   27,131     $   10,805       $    7,244    $     7,240
   maturities
 Stockholders' equity        $ 280,292    $  376,035     $  555,519       $  815,541    $   930,044
</TABLE>

Item 7.  Management's Discussion and Analysis of Financial Condition and
Results of Operations
     
     This  Report  includes forward-looking statements made  based  on
current management expectations pursuant to the safe harbor provisions
of  the  Private  Securities Litigation Reform  Act  of  1995.   These
statements  are  not  guarantees  of  future  performance  and  actual
outcomes  may differ materially from what is expressed or  forecasted.
There  are  many  factors that affect the Company's business  and  its
results of operations, including the factors discussed below.

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:

                                      1995         1996         1997
 Net sales                           100.0%       100.0%       100.0%
 Cost of goods sold                   83.5%        81.4%        82.9%
   Gross profit                       16.5%        18.6%        17.1%
 Selling, general and                                             
   administrative expenses             9.7%       11.5%         12.5%
 Nonrecurring expenses                 -            -            1.8%
   Operating income                    6.8%         7.1%         2.8%
 Other income, net                     0.3%         0.5%         0.4%
   Income before income taxes          7.1%         7.6%         3.2%
 Provision for income taxes            2.4%         2.6%         1.5%
 Net income                            4.7%         5.0%         1.7%
                                                             
     Sales.   Sales  in 1997 increased 25% to $6.29 billion  from
$5.04  billion  in  1996.  The increase in  sales  resulted  from
continued demand growth in the Americas and Asia Pacific markets,
the  acquisition of Advanced Logic Research, Inc. (ALR)  on  July
23,  1997,  and  the continued growth in sales of  the  Company's
portable products.
     
     Sales  in  the Americas region grew 25% over 1996 levels  to
$5.30  billion.   International sales  increased  25%  to  $989.8
million  over  the  prior year.  Sales in the Company's  European
region were $634.6 million, an increase of approximately 15% over
the  comparable period of 1996 despite a decrease in  sales  from
the  level in the second quarter of 1997.  Sales for 1997 in  the
Company's Asia Pacific region totaled $355.2 million, an increase
of 50% over 1996.

     Unit  shipments  in  1997  increased  35%  to  approximately
2,580,000  from  1,909,000  in  1996.   Unit  shipments  in   the
Company's  Americas region grew 35% over 1996.  In the  Company's
European  region,  unit shipments grew 20% over  1996,  and  unit
shipments  in  the Company's Asia Pacific region  grew  84%  over
1996.
     
     Sales  from  Pentium MMX-based and Pentium II-based  desktop
products  accounted for approximately 32% and 24%,  respectively,
of  the  Company's total sales in 1997.  Throughout  1997,  sales
from  Pentium  MMX-based and Pentium II-based products  increased
each quarter, to approximately 35% and 49%, respectively, in  the
fourth  quarter.   Portable products accounted for  approximately
11%  of  total sales in 1997, versus approximately  9%  in  1996.
Portable  products  sales increased 56% and  convergence  product
sales increased 55% over the prior year.
     
     Weighted average unit prices (AUP) declined approximately 8%
during 1997. Generally, unit prices for specific PC products have
decreased  over  time, reflecting the effects of competition  and
reduced  component costs associated with advances in  technology.
The Company has generally offset the impact of these declines  in
component  costs by adding or improving product features  and  by
introducing new products based on newer technology at higher unit
prices,  resulting in fairly stable unit prices over  time.  When
the  timing  of  component  cost reductions  and  new  technology
introduction is different, AUPs can fluctuate.  The reduction  in
1997  AUPs  from 1996 levels is partially due to abnormally  high
AUPs experienced in the first four months of 1996.  Beginning  in
the  second quarter of 1996, in addition to normal component cost
declines, the Company experienced significant declines in Dynamic
Random  Access Memory (DRAM) costs.  AUPs throughout  the  second
half  of 1996 and the first half of 1997 were fairly stable,  but
began  to decline in the third quarter of 1997 as component  cost
reductions again outpaced the introduction of new technology.
     
     Sales  in  1996  increased 37% to $5.04 billion  from  $3.68
billion  in  1995.  The increase resulted from  continued  demand
growth  in the Americas and European markets, expansion into  the
Asia  Pacific  region  and accelerated growth  in  sales  of  the
Company's  portable products.  Unit shipments in  1996  increased
43%  to  approximately 1,909,000 from 1,338,000 in 1995.  Average
unit prices declined approximately 4% during 1996, reflecting the
normal rate of component cost declines, significant cost declines
in DRAM and a slowing of new technology during 1996.

     Gross Profit.   Gross profit in 1997 increased approximately
15%  to  $1.076  billion from $936.2 million in 1996,  but  as  a
percentage  of sales, gross profit decreased to 17.1% from  18.6%
in  1996.   The decline in gross profit as a percentage of  sales
was  due  to the effects of excess inventories during  the  third
quarter of 1997.  During this time period, there were significant
declines  in  the market value of many inventory components.   In
order   to   promptly  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.

     Gross profit in 1996 increased approximately 54% from $606.1
million  in  1995.   As  a  percentage  of  sales,  gross  profit
increased  to  18.6% from 16.5% in 1995.  Gross  profit  improved
during  1996  principally due to improvements in meeting  product
sales  mix  forecasts  associated with the  introduction  of  new
products,  a  decrease in DRAM prices and decreases in  aggregate
royalty  cost per unit.  Gross margin as a percent of sales  also
increased  due  to the timing of component cost  decreases  being
passed on to customers through price declines.

     Selling,  General  and Administrative  Expenses.    Selling,
general  and administrative (SG&A) expenses in 1997 increased  by
approximately 36% to $786.2 million from $580.1 million in  1996.
As   a   percentage  of  sales,  these  expenses   increased   to
approximately  12.5% in 1997 from approximately  11.5%  in  1996.
The  increase is primarily the result of increases in  personnel,
marketing, depreciation and amortization and the inclusion of the
operating  expenses of ALR.  Beginning in 1997, certain  expenses
relating  to  the  fulfillment  of  parts  warranties  have  been
reclassed  from selling, general and administrative  expenses  to
cost of goods sold.
     
     Personnel-related costs increased approximately 33% in  1997
compared with 1996, as a result of the continued building of  the
Company's infrastructure and increased expenditures to expand the
sales  force  and  technical support.   The  Company  expects  to
continue to make the necessary personnel-related expenditures and
investments to manage the growth of the Company.

     Marketing  expenses increased approximately 52% in  1997  as
compared   to  1996.   The  increase  represents  the   Company's
continued  efforts to target broader market bases, including  the
novice  user.  Also, marketing efforts were increased to  support
the expansion of the Gateway CountrySM stores.
     
     Depreciation    and    amortization    expenses    increased
approximately  41% in 1997 compared to 1996, as a result  of  the
Company's  continued  investments  in  facilities  and   software
applications.  Amortization expense increased due  to  intangible
assets obtained in the acquisition of ALR during 1997.

     Selling,  general  and  administrative  expenses   in   1996
increased 62% to $580.1 million from $357.1 million in 1995.   As
a  percentage of sales, these expenses increased to 11.5% in 1996
from 9.7% in 1995.  Significant factors contributing to this  net
increase  included: higher personnel costs, additional  marketing
programs  and overhead expenses associated with the Asia  Pacific
region.
     
     Nonrecurring   Expenses.   The  Company   recorded   several
nonrecurring pretax charges totaling $113.8 million in the  third
quarter of 1997.  Of the nonrecurring charges, $59.7 million  was
for the write-off of in-process research and development acquired
with   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.

     Operating   Income.    Due  to  the  nonrecurring   expenses
incurred during the third quarter of 1997, a declining percentage
of gross profit and the increase in operating expenses, operating
income  in  1997 decreased by 50% to $176.4 million  from  $356.1
million in 1996.  Operating income, excluding nonrecurring  items
in  1997,  decreased  18%  from 1996 to  $290.3  million.   As  a
percentage of sales, operating income decreased to 2.8%  in  1997
(4.6%  excluding nonrecurring items) from 7.1% in 1996.  In 1996,
operating  income increased 43% from $249.0 million in 1995,  and
remained relatively constant as a percentage of sales.

     Other Income, Net.   Other income, net includes other income
net  of  expenses,  such as interest income  and  expense,  lease
financing  commissions, referral fees for  on-line  services  and
foreign exchange transaction gains and losses.  Other income, net
increased  to $27.2 million in 1997 from $26.6 million  in  1996.
The  principal  cause  of this increase  was  the  generation  of
additional  interest  income as a result of the  availability  of
additional  cash  and marketable securities in 1997  compared  to
1996.

     Other  income, net in 1996 increased to $26.6  million  from
$13.1 million in 1995 primarily due to additional interest income
generated as a result of the availability of additional cash  and
marketable securities as compared to 1995, and the generation  of
commissions from referrals for on-line services.

     Income  Taxes.  The Company's effective tax rate was  46.1%,
34.5%,  and  34.0%  in  1997, 1996 and 1995,  respectively.   The
increase in the 1997 effective tax rate was primarily due to  the
impact of nonrecurring expenses relating to the write-off of  in-
process  research and development arising in connection with  the
acquisitions  of  ALR  and certain assets of  Amiga  Technologies
which  were nondeductible for income tax purposes.  The effective
tax   rate   for  1997  excluding  the  nonrecurring  items   was
approximately  35.5%.   The change from  1996  is  attributed  to
shifts  in the geographic distribution of the Company's earnings,
which  also impacted the change in the 1996 rate versus the  1995
rate.

Liquidity and Capital Resources

     The   Company   has  financed  its  operating  and   capital
expenditure  requirements to date principally through  cash  flow
from  its operations.  At December 31, 1997, the Company had cash
and cash equivalents of $593.6 million, marketable securities  of
$38.6  million  and an unsecured committed credit  facility  with
certain banks of $225 million, consisting of a revolving line  of
credit  facility and a sub-facility for letters  of  credit.   At
December  31,  1997,  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  or  future
credit  facilities,  will provide adequate  flexibility  for  the
Company's financial needs for at least the next 12 months.

     The  Company generated approximately $442.8 million of  cash
from  operations  during 1997.  Increases in accounts  receivable
and  other  current assets consumed approximately  $96.5  million
offset by decreases in inventory levels of $59.5 million.   Also,
increases  in  accounts  payable, accrued liabilities  and  other
liabilities   contributed  $156.9  million.   The  Company   used
approximately $360.7 million in cash for investing activities  as
a  result of the Company's continued investment in facilities,  a
$38.6  million net investment in marketable securities,  and  the
$142.3  million  purchase of ALR, net of cash acquired.   Of  the
purchase   price,  $58.6  million  was  allocated  to  in-process
research  and development projects.  The Company expects  ALR  to
continue  to  develop  these projects  into  commercially  viable
products in the normal course of business over the next  1  to  5
years.

     At December 31, 1997, the Company had long-term indebtedness
and  capital  lease obligations of approximately  $21.2  million.
These obligations relate primarily to the Company's expansion  of
international  operations and its investments  in  equipment  and
facilities.   Borrowings, exclusive of capital lease obligations,
bear  fixed and variable rates of interest currently ranging from
interest  free  (for certain incentive funds from the  Industrial
Development Authority of the City of Hampton, Virginia) to  8.87%
and have varying maturities through the year 2001.  The Company's
capital lease obligations relate principally to its computer  and
telephone system equipment.

     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  1997,  the  Financial Accounting  Standards  Board
(FASB)  issued Statement of Financial Accounting Standard  (SFAS)
No. 131 - Disclosures about Segments of an Enterprise and Related
Information.  SFAS 131 requires publicly-held companies to report
financial  and  other  information  about  key  revenue-producing
segments  of  the entity for which such information is  available
and  is  utilized  by  management.  Specific  information  to  be
reported for individual segments includes profit or loss, certain
revenue and expense items and total assets.  A reconciliation  of
segment  financial  information  to  amounts  reported   in   the
financial  statements is also to be provided.  SFAS  No.  131  is
effective  for  the Company in 1998.  Based on  current  internal
reporting,  the  Company  does not  expect  this  new  accounting
pronouncement  to  have  a  significant  impact  on  its  segment
reporting.

Year 2000

     The   Company  recognizes  the  need  to  ensure  that   its
operations  will not be adversely impacted by Year 2000  software
failures.  Software failures due to processing errors potentially
arising  from calculations using the Year 2000 date are  a  known
risk.
     
     In  1997,  the  Company created a corporate-wide  Year  2000
project team representing all business units of the Company.  The
Company's    Year   2000   remediation   efforts   include    the
implementation  of  upgrades to existing system  applications  as
well   as   the  addition  and  implementation  of   new   system
applications.
     
     The  Company  anticipates the implementation phase  of  this
project to begin no later than the second quarter of 1998 and  to
be  completed  by the second quarter of 1999.  If  the  necessary
modifications and implementations are not made on a timely basis,
the  Year 2000 issue could have a material, adverse effect on the
business,  consolidated financial position, results of operations
or cash flows of the Company.
     
     In  addition  to internal Year 2000 software  and  equipment
implementation  activities, the Company is in  contact  with  its
suppliers  to assess their compliance.  There can be no  absolute
assurance that there will not be a material adverse effect on the
Company if third parties do not convert their systems in a timely
manner  and  in  a  way  that is compatible  with  the  Company's
systems.   The  Company believes that its actions with  suppliers
will minimize these risks.
     
     Through 1997, the Company had expensed incremental costs  of
approximately  $350,000  related to  the  Year  2000  remediation
efforts.   The current total estimated cost to complete the  Year
2000 remediation efforts is from $10 to $15 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.
     
     The  Company's current estimates of the amount of  time  and
costs  necessary to implement and test its computer  systems  are
based on the facts and circumstances existing at this time.   The
estimates  were derived utilizing multiple assumptions of  future
events including the continued availability of certain resources,
implementation  success and other factors.  New developments  may
occur that could affect the Company's estimates for the Year 2000
compliance.  These developments include, but are not limited  to:
(a)  the availability and cost of personnel trained in this area,
(b)  the ability to locate and correct all relevant computer code
and  equipment,  and  (c) the planning and  modification  success
needed to achieve full implementation.  In addition, since  there
is  no  uniform definition of Year 2000 "compliance" and not  all
customer   situations  can  be  anticipated,  the   Company   may
experience an increase in warranty and other claims as  a  result
of the Year 2000 transition.

Factors That May Affect Future Results

     Factors that could cause future results to differ from these
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  results,  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 can be 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.

     Certain  key management employees, particularly  Ted  Waitt,
Chairman  and  Chief  Executive Officer  and  a  founder  of  the
Company,  have been instrumental in the success of  the  Company.
The Company has not entered into an employment agreement with Ted
Waitt.   The  loss of Ted Waitt's services could  materially  and
adversely affect the Company.

     Over the past several years, state tax authorities have made
inquiries  as  to  whether or not the Company's alleged  contacts
with  those states might require the collection of sales and  use
taxes  from customers and/or the payment of income tax  in  those
states.   The  Company evaluates such inquiries on a case-by-case
basis, and will vigorously contest any such claims for payment of
taxes  which  it  believes are without merit.   The  Company  has
favorably resolved these types of tax issues in the past  without
any  material  adverse consequences.  However, there  can  be  no
assurance  that the amount of any sales or use taxes the  Company
might  ultimately be required to pay for prior periods would  not
materially  affect  the Company's results of operations  or  cash
flows in any given reporting period.
     
     The  Company currently pays state income taxes in the states
where  it  has  a physical presence.  The Company  has  not  paid
income  taxes in other states, nor has it established significant
reserves for the payment of such taxes.  Management believes that
the  amount  of  any income tax the Company might  ultimately  be
required  to  pay  for  prior periods would  not  materially  and
adversely  affect the Company's business, consolidated  financial
position, results of operations or cash flows.
     
     
Item  7A.  Quantitative and Qualitative Disclosures About  Market
Risk
     
     The results of the Company's foreign operations are affected
by  changes  in exchange rates between certain foreign currencies
and  the United States dollar.  The functional currency for  most
of  the  Company's  foreign operations is the U.S.  dollar.   The
functional  currency for the remaining operations  is  the  local
currency  in  which  the  subsidiaries operate.   Sales  made  in
foreign  currencies translate into higher or lower sales in  U.S.
dollars  as the U.S. dollar strengthens or weakens against  other
currencies.  Therefore, changes in exchange rates may  negatively
affect the Company's consolidated net sales (as expressed in U.S.
dollars) and gross margins from foreign operations.  The majority
of  the  Company's  component purchases are denominated  in  U.S.
dollars.
     
     The Company uses foreign currency forward contracts to hedge
foreign  currency  transactions and probable anticipated  foreign
currency transactions.  These forward contracts are designated as
a hedge of international sales by U.S. dollar functional currency
entities   and   intercompany  purchases   by   certain   foreign
subsidiaries.   The principal currencies hedged are  the  British
Pound,  the Japanese Yen, the French Franc and the Deutsche  Mark
over  periods ranging from one to six months.  Forward  contracts
are  accounted for on a mark-to-market basis, with  realized  and
unrealized gains or losses recognized currently.  Gains or losses
arising from forward contracts which are effective as a hedge are
included   in   the   basis   of  the  designated   transactions.
Fluctuations in U.S. dollar currency exchange rates did not  have
a  significant  impact  on the Company's  consolidated  financial
position,  results  of  operations or cash  flows  in  any  given
reporting period.

     Foreign currency exchange contracts are sensitive to changes
in  foreign  currency exchange rates.  At December  31,  1997,  a
hypothetical  10%  adverse  change in foreign  currency  exchange
rates  underlying  the  Company's open  forward  contracts  would
result  in  an  unrealized  loss of  approximately  $27  million.
Unrealized  gains/losses in foreign currency  exchange  contracts
represent the difference between the hypothetical rates  and  the
current market exchange rates.  Consistent with the nature of  an
economic  hedge, such unrealized gains or losses would be  offset
by  corresponding  decreases or increases, respectively,  of  the
underlying transaction being hedged.


Item 8.  Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULE


Financial Statements:

Report of Independent Accountants .......................      18

Consolidated Statements of Operations for the years
     ended December 31, 1995, 1996 and 97 ...............      19

Consolidated Balance Sheets at December 31, 1996 and 1997      20

Consolidated Statements of Cash Flows for the years
     ended December 31, 1995, 1996 and 1997....................21

Consolidated Statements of Stockholders' Equity for the
     years ended December 31, 1995, 1996 and 1997..............22

Notes to Consolidated Financial Statements.................... 23

Financial Statement Schedule:

Schedule II -Valuation and Qualifying Accounts.................36

Report of Independent Accountants


To the Stockholders and Board of Directors
Gateway 2000, Inc.

     We  have  audited the consolidated financial statements  and
financial  statement schedule of Gateway 2000, Inc. as listed  in
the  index  on  page  17  of  this Form  10-K.   These  financial
statements   and  the  financial  statement  schedule   are   the
responsibility  of the Company's management.  Our  responsibility
is  to  express an opinion on these financial statements and  the
financial statement schedule based on our audits.

     We   conducted  our  audits  in  accordance  with  generally
accepted  auditing standards.  Those standards  require  that  we
plan  and perform the audit to obtain reasonable assurance  about
whether   the   financial  statements  are   free   of   material
misstatement.   An  audit includes examining, on  a  test  basis,
evidence  supporting the amounts and disclosures in the financial
statements.   An  audit  also includes assessing  the  accounting
principles used and significant estimates made by management,  as
well  as evaluating the overall financial statement presentation.
We  believe  that our audits provide a reasonable basis  for  our
opinion.

     In   our  opinion,  the  consolidated  financial  statements
referred  to above present fairly, in all material respects,  the
consolidated  financial  position of Gateway  2000,  Inc.  as  of
December 31, 1996 and 1997, and the consolidated results  of  its
operations and its cash flows for each of the three years in  the
period  ended  December  31,  1997 in conformity  with  generally
accepted accounting principles.  In addition, in our opinion, the
financial  statement schedule referred to above, when  considered
in  relation to the basic financial statements taken as a  whole,
presents  fairly,  in  all  material  respects,  the  information
required to be included therein.

/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.


Omaha, Nebraska
January 22, 1998
<TABLE>

                                
                       Gateway 2000, Inc.
              CONSOLIDATED STATEMENTS OF OPERATIONS
      For the years ended December 31, 1995, 1996 and 1997
            (in thousands, except per share amounts)

<CAPTION>
                                                                            
                                     1995              1996               1997
                                                                    
<S>                            <C>                <C>               <C>
Net sales                      $ 3,676,328        $  5,035,228      $  6,293,680
Cost of goods sold               3,070,234           4,099,073         5,217,239
       Gross profit                606,094             936,155         1,076,441
Selling, general and                                                                
   administrative expenses         357,086               580,061         786,168
Nonrecurring expenses                    -                   -           113,842
   Operating income                249,008             356,094           176,431
Other income, net                   13,085              26,622            27,189
   Income before income taxes      262,093             382,716           203,620
Provision for income taxes          89,112             132,037            93,823
   Net income                  $   172,981        $    250,679      $    109,797
                                                                    
                                                                    
Net income per share:                                               
   Basic                       $      1.19        $       1.64      $        .71
   Diluted                     $      1.09        $       1.60      $        .70
                                                                    
Weighted average shares                                             
outstanding:
   Basic                             145,256           152,745           153,840
   Diluted                           157,988           156,237           156,201
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
                                      
                             Gateway 2000, Inc.
                         CONSOLIDATED BALANCE SHEETS
                         December 31, 1996 and 1997
                  (in thousands, except per share amounts)
<CAPTION>
                                                     1996            1997                                      
<S>                                            <C>              <C>

ASSETS                        
Current assets:                                                            
    Cash and cash equivalents                   $    516,360    $   593,601
    Marketable securities                                 --         38,648
    Accounts receivable, net                         449,723        510,679
    Inventory                                        278,043        249,224
    Other                                             74,216        152,531
       Total current assets                        1,318,342      1,544,683
Property, plant and equipment, net                   242,365        336,469
Internal use software costs, net                      77,073         39,998
Intangibles, net                                       9,869         82,590
Other assets                                          25,762         35,531
                                                $  1,673,411    $ 2,039,271
LIABILITIES AND STOCKHOLDERS' EQUITY                                       
Current liabilities:                                                       
  Notes payable and current maturities of                                  
    long-term obligations                      $     15,041     $    13,969
    Accounts payable                                 411,788        488,717
    Accrued liabilities                             190,762         271,250
    Accrued royalties                               125,270         159,418
    Income taxes payable                             40,334          26,510
    Other current liabilities                        16,574          44,042
        Total current liabilities                   799,769       1,003,906
Long-term obligations, net of current                           
    maturities                                         7,244          7,240
Warranty and other liabilities                        50,857         98,081
        Total liabilities                            857,870      1,109,227
Commitments and Contingencies (Notes 3 and 4)                              
Stockholders' equity:                                                      
    Preferred stock, $.01 par value, 10,000                                
      shares authorized; none issued and                        
      outstanding                                         --    --
   Class A common stock, nonvoting, $.01 par                               
      value, 2,000 shares authorized; none                      
      issued and outstanding                              --    --
   Common stock, $.01 par value, 440,000                                   
      shares authorized; 153,512 shares and                          
      154,128 shares issued and outstanding,                         
      respectively                                     1,536       1,541
   Additional paid-in capital                        288,744        299,483
   Retained earnings                                 524,712        634,509
   Other                                                 549        (5,489)
          Total stockholders' equity                 815,541        930,044
                                               $  1,673,411     $ 2,039,271

The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
<TABLE>
                                        
                               Gateway 2000, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the years ended December 31, 1995, 1996 and 1997
                                 (in thousands)
<CAPTION>
                                        
                                              1995            1996            1997
 <S>                                       <C>             <C>                <C>

Cash flows from operating activities:                                                  
 Net income                                $  172,981      $ 250,679           $109,797
 Adjustments to reconcile net income                                                   
    to net cash provided by operating                  
    activities:
    Depreciation and amortization               38,086        61,763             86,774
  Provision for uncollectible                                                          
    accounts receivable                           7,779         20,832            5,688
    Deferred income taxes                     (23,778)        (13,395)         (63,247)
    Other, net                                     520          1,986             42
    Nonrecurring expenses                           --             --           113,842
    Changes in operating assets and                                                    
        liabilities:
         Accounts receivable                 (157,958)        (66,052)         (41,950)
         Inventory                          (103,202)         (54,261)           59,486
         Other current assets                 (10,847)        (13,311)         (54,513)
         Accounts payable                      51,765          176,724           66,253
         Accrued liabilities                    20,690          51,390           48,405
         Accrued royalties                      37,567           1,885           34,148
         Income taxes payable                  50,516           42,880            8,347
         Other current liabilities             (7,252)             177           27,469
         Other liabilities                     12,890           22,699           42,256
             Net cash provided by                                               442,797
               operating activities              89,757        483,996
 Cash flows from investing                                                             
   activities:
     Capital expenditures                      (95,817)      (112,187)        (162,010)
     Internal use software costs               (39,040)       (31,559)         (13,646)
     Purchases of available-for-sale                                                   
         securities                            (10,679)             --         (49,619)
     Purchases of held-to-maturity                                                     
         securities                             (1,685)             --               --
     Proceeds from maturities of                                                       
         held-to-maturity securities              5,000             --               --
                                                                                       
                                                                                       
     Proceeds from maturities or                                                       
         sales of available-for-                                                       
         sale securities                         33,023          3,030           10,985
     Acquisitions, net of cash                                                         
         acquired                               (3,620)             --        (142,320)
     Other, net                                (13,152)          2,667          (4,055)
           Net cash used in                                                            
              investing activities            (125,970)      (138,049)        (360,665)
 Cash flows from financing                                                             
      activities:
     Proceeds from issuance of notes                                             10,000
       payable                                    5,000         10,000
     Principal payments on long-term                                                   
       obligations and notes payable           (24,600)       (14,047)         (15,588)
     Stock options exercised                                                      5,741
                                                  8,107          9,520
         Net cash provided by (used                                                 153
           in) financing activities            (11,493)          5,473
 Foreign exchange effect on cash and                                                   
     cash equivalents                                82        (1,457)          (5,044)
 Net increase (decrease) in cash and                                             77,241
     cash equivalents                          (47,624)        349,963
 Cash and cash equivalents,                     214,021                         516,360
     beginning of year                                         166,397
 Cash and cash equivalents, end of          $   166,397     $  516,360        $ 593,601
     year
                                                                                       
</TABLE>
                                                                              
The accompanying notes are an integral part of the consolidated financial
statements.


<TABLE>
                                        
                               Gateway 2000, Inc.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              For the years ended December 31, 1995, 1996 and 1997
                                 (in thousands)
<CAPTION>
                                        
                                  Common Stock
                                                    Additional                
                                                      Paid-in      Retained                       
                               Shares     Amount      Capital      Earnings       Other        Total
<S>                             <C>      <C>          <C>           <C>         <C>           <C>

   Balances at December 31,                                                                              
     1994                       144,792   $  1,448    $ 273,676     $ 101,052    $   (141)    $  376,035
  Net income                         --         --           --       172,981           --       172,981
        
   Stock issuances under                                                                                 
    employee plans,                                                                                     
    including tax benefit of                                                                            
    $ 23,030                      6,541         66       31,071            --            --        31,137
                      
  Stock retirement              (2,227)       (22)     (25,046)            --            --      (25,068)
                             
  Foreign currency                                                                                       
    translation                      --         --           --             --          324           324
  Other                              --         --           --             --          110           110

Balances at December 31,
1995                            149,106      1,492      279,701        274,033          293       555,519
  Net income                         --         --           --        250,679           --       250,679
                                    
  Stock issuances under                                                                                  
    employee plans,                                                                                     
    including tax benefit of                                                                            
    $ 30,451                      6,545         66       39,905             --           --        39,971
                                 
  Stock retirement              (2,139)       (22)     (30,862)             --           --      (30,884)
                                
  Foreign currency                                                                                       
    translation                      --         --           --             --          225           225
                                    
  Other                              --         --           --             --           31            31
                                
Balances at December 31,                                                                                 
1996                            153,512      1,536      288,744        524,712          549       815,541
                                   
  Net income                         --         --           --        109,797           --       109,797
                                   
  Stock issuances under                                                                                  
    employee plans,                                                                                     
    including tax benefit of                                                                            
    $ 5,003                         616          5       10,739             --           --        10,744
                                   
  Foreign currency                                                                                       
     translation                     --         --           --             --      (6,053)       (6,053)
                                     
  Other                              --         --           --             --           15            15
                                  
Balances at December 31,                                                                                 
1997                            154,128    $ 1,541     $299,483     $  634,509  $   (5,489)     $ 930,044
</TABLE>
                                 

The accompanying notes are an integral part of the consolidated financial
statements.

Gateway 2000, Inc.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                
1.   Summary of Significant Accounting Policies:

     Gateway   2000,   Inc.   (the   "Company")  is   a   direct   marketer   of
personal    computers   ("PCs")   and   PC-related   products.    The    Company
develops,    manufactures,   markets   and   supports   a    broad    line    of
desktop    and    portable    PCs,    digital    media    (convergence)     PCs,
servers,      workstations     and     PC-related     products      used      by
individuals,      families,     businesses,     government     agencies      and
educational institutions.

     The    significant   accounting   policies   used   in   the    preparation
of    the   consolidated   financial   statements   of   Gateway   2000,    Inc.
are as follows:

     (a)  Principles of Consolidation:

     The    consolidated    financial   statements    include    the    accounts
of     the    Company    and    its    wholly    owned    subsidiaries.      All
significant    intercompany    accounts    and    transactions     have     been
eliminated.

     (b)  Cash and Cash Equivalents:

     The   Company   considers   all   highly  liquid   debt   instruments   and
money   market   funds   with  an  original  maturity   of   three   months   or
less    to    be   cash   equivalents.    The   carrying   amount   approximates
fair value because of the short maturities of these instruments.

     (c)  Marketable Securities:

     The    carrying   amounts   of   the   marketable   securities   used    in
computing   unrealized   and   realized  gains   and   losses   are   determined
by    specific    identification.    Fair   values    are    determined    using
quoted    market    prices.     For    available-for-sale    securities,     net
unrealized   holding   gains   and   losses   are   reported   as   a   separate
component    of    stockholders'   equity,   net   of   tax.    Held-to-maturity
securities    are    recorded    at    amortized    cost.     Amortization    of
related   discounts   or   premiums  is  included  in   the   determination   of
net income.
     
     Marketable    securities    at   December   31,    1997,    consisted    of
available-for-sale     mutual    funds,    commercial     paper     and     debt
securities,   with   a   market   value  of   $38,648,000   and   an   amortized
cost    of    $38,636,000,    with    variable    maturities    through    1999.
Realized   and   unrealized  gains  and  losses  are  not   material   for   any
of the periods presented.

     (d)  Inventory:

     Inventory,      which     is     comprised     of     component      parts,
subassemblies   and  finished  goods,  is  valued  at  the   lower   of   first-
in,   first-out   (FIFO)   cost  or  market.   On   a   quarterly   basis,   the
Company   compares   on   a   part   by  part   basis,   the   amount   of   the
inventory   on   hand   and   under  commitment  with  its   latest   forecasted
requirements    to    determine    whether    write-downs    for    excess    or
obsolete inventory are required.

     (e)  Property, Plant and Equipment:

     Property,     plant     and    equipment    are     stated     at     cost.
Depreciation     is    provided    using    straight-line    and     accelerated
methods   over   the   assets'   estimated  useful   lives.    Amortization   of
leasehold   improvements   is  computed  using  the   shorter   of   the   lease
term   or   the   estimated   useful  life  of  the  underlying   asset.    Upon
sale   or   retirement   of   property,  plant  and   equipment,   the   related
costs    and    accumulated   depreciation   or   amortization    are    removed
from   the   accounts   and   any   gain   or   loss   is   included   in    the
determination of net income.

     (f)  Internal Use Software Costs:

     The Company capitalizes costs of purchased software and,
once technological feasibility has been established, costs
incurred in developing software for internal use.  Amortization
of software costs begins when the

Gateway 2000, Inc.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     
     
software   is   placed   in  service  and  is  computed   on   a   straight-line
basis   over   the   estimated   useful  life   of   the   software,   generally
from three to five years.
     
     (g)  Intangible Assets:

     Intangible     assets    principally    consist    of     technology,     a
customer   base   and   distribution   network,   an   assembled   work    force
and    trade    name    obtained    through   acquisition.     The    cost    of
intangible   assets   is   amortized  on  a   straight-line   basis   over   the
estimated   periods   benefited  ranging  from  three   to   ten   years.    The
realizability   of   intangibles   is   evaluated   periodically    as    events
or    circumstances   indicate   a   possible   inability   to   recover   their
carrying amount.
     
     (h)  Royalties:
     
     The     Company    has    royalty-bearing    license    agreements     that
allow   the   Company   to  sell  certain  hardware  and   software   which   is
protected    by   patent,   copyright   or   license.    Royalty    costs    are
accrued   and   included   in   cost   of   goods   sold   when   products   are
shipped   or   amortized   over  the  period  of  benefit   when   the   license
terms are not specifically related to the units shipped.
     
     (i)  Warranty and Other Post-Sales Support Programs:

     The Company provides currently for the estimated costs that
may be incurred under its warranty and other post-sales support
programs.
     
     (j)  Stock Split:

     On   May   15,   1997,  the  Board  of  Directors  authorized  a   two-for-
one   stock   split  which  was  distributed  on  or  about   June   16,   1997,
to   shareholders   of  record  on  June  2,  1997.   All  references   in   the
financial   statements   to  number  of  shares  and  per   share   amounts   of
the    Company's   stock   have   been   retroactively   restated   to   reflect
the increased number of common shares outstanding.

      (k) Revenue Recognition:

     Sales    are   recorded   when   products   are   shipped.    A   provision
for   estimated   sales   returns  is  recorded   in   the   period   in   which
related    sales    are    recognized.    Revenue   from    separately    priced
extended    warranty   programs   is   deferred   and   recognized   over    the
extended warranty period on a straight-line basis.

     (l)  Net Income Per Share:

     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.
<TABLE>
                                        
                               Gateway 2000, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     
     
     The  following  table sets forth a reconciliation of  shares  used  in  the
computation of basic and diluted earnings per share.
<CAPTION>
     
                                                              1995           1996           1997
                                                                        (in thousands)
<S>                                                        <C>            <C>              <C>

Net income for basic and diluted earnings per                                                        
    share                                                  $    172,981   $   250,679      $  109,797
Weighted average shares for basic earnings per                                                       
    share                                                       145,256       152,745         153,840
Dilutive effect of stock options                                 12,732         3,492           2,361
Weighted average shares for diluted                                                                  
   earnings per share                                           157,988       156,237         156,201
</TABLE>
     
     (m)  Foreign Currency:

     The  Company  uses the U.S. dollar as its  functional
currency for the majority of its international operations.
For   subsidiaries  where  the  local  currency   is   the
functional  currency,  the  assets  and  liabilities   are
translated into U.S. dollars at exchange rates  in  effect
at  the balance sheet date.  Income and expense items  are
translated at the average exchange rates prevailing during
the   period.   Gains  and  losses  from  translation  are
included  as  a component of stockholders' equity.   Gains
and  losses resulting from remeasuring monetary asset  and
liability  accounts  that  are denominated  in  currencies
other than a subsidiary's functional currency are included
in "Other income, net".

     The  Company uses foreign currency forward  contracts
to   hedge  foreign  currency  transactions  and  probable
anticipated foreign currency transactions.  These  forward
contracts are designated as a hedge of international sales
by   U.S.   dollar   functional  currency   entities   and
intercompany  purchases by certain  foreign  subsidiaries.
The principal currencies hedged are the British Pound, the
Japanese Yen, the French Franc, and the Deutsche Mark over
periods ranging from one to six months.  Forward contracts
are accounted for on a mark-to-market basis, with realized
and  unrealized  gains  or  losses  recognized  currently.
Gains  or losses arising from forward contracts which  are
effective  as  a hedge are included in the  basis  of  the
designated   transactions.   The  related  receivable   or
liability with counterparties to the forward contracts  is
recorded  in the consolidated balance sheet.   Cash  flows
from  settlements  of forward contracts  are  included  in
operating  activities  in the consolidated  statements  of
cash   flows.   Aggregate  transaction  gains  and  losses
included  in  the  determination of  net  income  are  not
material  for  any  period presented.   Forward  contracts
designated to hedge foreign currency transaction  exposure
of  $132,930,000  and  $257,051,000  were  outstanding  at
December  31, 1996 and 1997, respectively.  The  estimated
fair value of these forward contracts at December 31, 1996
and  1997, was $137,726,000 and $253,519,000, respectively
based on quoted market prices.

     The  Company continually monitors its positions with,
and   the  credit  quality  of,  the  major  international
financial  institutions which are  counterparties  to  its
foreign   currency  forward  contracts,   and   does   not
anticipate nonperformance by any of these counterparties.

     (n)  Use of Estimates and Certain Concentrations:

     The preparation of 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  and
disclosure  of  contingent assets and liabilities  at  the
date  of the financial statements and the reported amounts
of  revenues  and  expenses during the  reporting  period.
Actual results could differ from those estimates.
     
     Certain   components   used   by   the   Company   in
manufacturing of PC systems are purchased from  a  limited
number  of  suppliers.   An  industry  shortage  or  other
constraints of any key component could result  in  delayed
shipments and a possible loss of sales, which could affect
operating results adversely.
                                
                       Gateway 2000, Inc.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     
     
     (o)  Reclassifications:

     Certain  reclassifications have been made  to  prior  years'
financial  statements  to conform to current  year  presentation.
These reclassifications had no impact on previously reported  net
income or stockholders' equity.

2.   Financing Arrangements:

     (a)  Credit Agreement:

     The  Company is party to an unsecured bank credit  agreement
(the "Agreement"), totaling $225 million.  The Agreement consists
of  (1)  a revolving line of credit facility for committed  loans
and  bid  loans;  and (2) a sub-facility for letters  of  credit.
Borrowings  under the agreement bear interest at the banks'  base
rate  or,  at the Company's option, borrowing rates  based  on  a
fixed spread over the London Interbank Offered Rate (LIBOR).  The
Agreement requires the Company to maintain a minimum tangible net
worth  and maximum debt leverage ratio, as well as minimum  fixed
charge coverage.  There were no borrowings outstanding at the end
of 1996 and 1997.

     At  December 31, 1996 and 1997, approximately $4,360,000 and
$3,515,000,  respectively, was committed to  support  outstanding
standby letters of credit.
     
     (b)  Long-term Obligations:

     The  carrying amount of the Company's long-term  obligations
approximates the fair value, which is estimated based on  current
rates  offered  to  the  Company  for  obligations  of  the  same
remaining  maturities.  Long-term obligations include  notes  and
obligations under capital leases and consist of the following:

                                          December 31,
                                                            1996       1997
                                                            (in thousands)
                                                                         
Notes payable through 2001 with interest rates ranging                       
   from zero to 8.87%                                      $ 19,312  $ 20,568
                                                                             
Obligations under capital leases, payable in monthly                         
   installments at fixed rates ranging from 3.28% to                         
   5.90% through 1999 (Note 3)                                2,973       641
                                                             22,285    21,209
Less current maturities                                      15,041    13,969
                                                           $  7,244  $  7,240
                                                                             
     
                       Gateway 2000, Inc.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                
     The      long-term     obligations,     excluding     obligations     under
capital   leases,   have   the  following  maturities   as   of   December   31,
1997:
                         (in thousands)


                  1998                  $ 13,571
                  1999                      4,928
                  2000                         69
                  2001                      2,000
                  2002                         --
                                        $ 20,568


3.   Commitments:

     The   Company   leases  certain  operating  facilities   and
equipment  under  noncancelable  operating  leases  expiring   at
various  dates  through  2010.  Rent  expense  was  approximately
$6,214,000, $11,873,000, and $16,105,000 for 1995, 1996 and 1997,
respectively.
                                
     Future minimum lease payments under terms of these leases as
of December 31, 1997 are as follows:
     
                                       Capital    Operating
                                       Leases      Leases
                                         (in thousands)
                                                
          1998                           $  398   $  15,336
          1999                              254      12,695
          2000                                3       9,250
          2001                               --       8,259
          2002                               --       6,360
          Thereafter                         --       3,625
          Total minimum lease                              
            payments                     $  655   $  55,525
          Less amount representing                         
            interest                         14
          Present value of net                             
            minimum lease payments       $  641
                                                           
     
     The   Company   has  entered  into  licensing  and   royalty
agreements  which allow it to use certain hardware  and  software
intellectual   properties  in  its  products.   Minimum   royalty
payments  due under these agreements for the period 1998  through
2002  total approximately $346,600,000. Total royalty expense  is
expected  to  be  greater  than this  minimum  amount  for  these
periods.

4.   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.
     
     Over the past several years, state tax authorities have made
inquiries  as  to  whether or not the Company's alleged  contacts
with  those states might require the collection of sales and  use
taxes  from customers and/or the payment of income tax  in  those
states.   The  Company evaluates such inquiries on a case-by-case
basis, and will vigorously contest any such claims for payment of
taxes  which  it  believes are without merit.   The  Company  has
favorably resolved these types of tax issues in the past  without
any  material  adverse consequences.  However, there  can  be  no
assurance  that the amount of any sales or use taxes the  Company
might  ultimately be required to pay for prior periods would  not
materially  affect  the Company's results of operations  or  cash
flows in any given reporting period.
     
     The  Company currently pays state income taxes in the states
where  it  has  a physical presence.  The Company  has  not  paid
income   taxes  in  any  other  state,  nor  has  it  established
significant  reserves for the payment of such taxes.   Management
believes  that  the  amount of any income tax the  Company  might
ultimately  be  required  to  pay for  prior  periods  would  not
materially   and   adversely  affect  the   Company's   business,
consolidated  financial position, results of operations  or  cash
flows.



5.   Income Taxes:

     The components of the provisions for income taxes are as
follows:

                                  For the year ended December 31,

                                   1995        1996        1997
                                 
                                 (in thousands)
       Current:                                          
             United States        $109,296    $140,451    $154,049
             Foreign                 3,594       4,981       3,021
       Deferred:                                                  
             United States        (19,823)     (1,727)    (49,564)
             Foreign               (3,955)    (11,668)    (13,683)
                                 $  89,112    $132,037   $  93,823
     
     Income  (loss)  before  income taxes included  approximately
$9,300,000,  $2,400,000  and  ($24,000,000)  related  to  foreign
operations for the years ended December 31, 1995, 1996 and  1997,
respectively.

      A  reconciliation of the provision for income taxes and the
amount computed by applying the federal statutory income tax rate
to income before taxes is as follows:

                                   1995        1996        1997
                                          (in thousands)
     Federal income tax at                               
        statutory rate           $  91,732   $133,951    $  71,267
     Nondeductible purchased                             
      research and development                                    
        costs                           --         --       20,704
     Other, net                    (2,620)     (1,914)       1,852
     Provision for income taxes  $  89,112   $132,037    $  93,823


                       Gateway 2000, Inc.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     
     
     Deferred tax assets and deferred tax liabilities result from
temporary differences in the following accounts:
     
                    
                                               December 31,
                                            1996        1997
                                             (in thousands)
      U.S. deferred tax assets:                       
           Inventory                       $  8,768   $ 20,572
           Accounts receivable                4,955       6,775
           Accrued liabilities               21,035      35,793
           Other liabilities                 16,101      36,912
           Property, plant & equipment          539          --
           Other                              1,125       3,612
                Total U.S.                   52,523     103,664
      Foreign deferred tax assets:                             
           Operating loss carryforwards      12,619      17,832
           Other                              3,004       2,459
                Total foreign                15,623      20,291
      Total deferred tax assets              68,146     123,955
      U.S. deferred tax liabilities:                           
           Intangible assets                 20,126      34,006
           Property, plant & equipment           --       2,668
           Other                                268       3,439
      Total deferred tax liabilities         20,394      40,113
      Net deferred tax assets             $ 47,752    $ 83,842
                                                               
     
     The Company has foreign net operating loss carryforwards  of
$49,000,000.   Of this amount, $8,300,000  expires  in  the  year
2000,  $27,300,000 in the year 2002 and $13,400,000 in  the  year
2006.   The  Company  has  assessed its sales  forecast  and  the
expiration  of carryforwards and has determined that is  it  more
likely  than not that the deferred tax asset relating to  foreign
net operating loss carryforwards will be realized.
     
6.   Stock Option Plans:

     In  1991,  the Company entered into stock option  agreements
with  certain  officers providing for the purchase of  13,224,120
shares of the Company's Common Stock.

     In  December 1991, the Company and its stockholders  adopted
the  Gateway 2000, Inc. 1992 Stock Option Plan ("the 1992  Option
Plan") for the benefit of its officers and other managers.  Under
the 1992 Option Plan, options to purchase 1,105,104 shares of the
Company's Class A Common Stock were granted.  Shares of  Class  A
Common  Stock may be converted into an equal number of shares  of
Common  Stock at any time after December 18, 1994.  Options  were
first  granted under the Plan in 1992 and generally vest  over  a
four-year period, retroactive to an option holder's initial  date
of employment.  These options expire, if not exercised, ten years
from the date of grant.

     In  1993,  the  Company  and  its stockholders  adopted  the
Gateway  2000,  Inc.  1993 Stock Option Plan  (the  "1993  Option
Plan")  which  replaced the 1992 Option  Plan.   Under  the  1993
Option  Plan, options to purchase up to 3,874,416 shares  of  the
Company's  Common Stock or Class A Common Stock may  be  granted.
Under the 1993 Option Plan, after December 14, 1993, only options
for  the  purchase of Common Stock may be granted.  These options
generally  vest over a four-year period beginning on  either  the
grant  date  or  the option holder's initial date of  employment.
These  options expire, if not exercised, ten years from the  date
of grant.

     In  1993, the Company and its stockholders also adopted  the
Gateway 2000, Inc. 1993 Non-Employee Directors Stock Option  Plan
(the   "Director  Option  Plan").   The  Director   Option   Plan
authorized the issuance of up to 40,000 shares of Common Stock to
non-employee directors. Options granted under this plan vest  one
year  from the grant date and expire, if not exercised, ten years
from the date of grant.
     
     In  1996,  the  Company  and  its stockholders  adopted  the
Gateway  2000,  Inc. 1996 Long-Term Incentive  Equity  Plan  (the
"1996   Employee   Plan").   Under  the   1996   Employee   Plan,
participants may receive stock options, stock appreciation rights
or  stock  awards as determined by the Compensation Committee  of
the Board of Directors.  The aggregate number of shares of Common
Stock  which  may be issued or transferred to participants  under
the  1996  Employee  Plan is 12,800,000.  Stock  options  granted
under  this  plan vest over a four-year period beginning  on  the
grant date and expire, if not exercised, ten years from the  date
of grant.

     In  addition,  in  1996, the Company  and  its  stockholders
adopted the Gateway 2000, Inc. 1996 Non-Employee Directors  Stock
Option  Plan  (the  "1996  Director  Plan")  which  replaced  the
Director  Option  Plan.  The 1996 Director  Plan  authorizes  the
issuance  of up to 600,000 shares of Common Stock to non-employee
directors.  Options granted generally vest over a three-year time
period  beginning on the grant date and expire, if not exercised,
ten years from the date of grant.
     
     In 1997, the Company introduced the Gateway GoldShares stock
option  program  and  awarded  stock  options  pursuant  to   the
Company's  1996  Long-Term  Incentive  Equity  Plan  to  eligible
employees  based on length of service and pay level.   Under  the
GoldShares  program, eligible employees were granted  options  to
purchase approximately 1,300,000 shares of Common Stock at $32.63
per share in September 1997.  Options granted under the plan vest
at  the  rate of 25% per year from the grant date and expire,  if
not exercised, ten years from the date of grant.

     The  Company  has adopted the disclosure-only provisions  of
Statement  of  Financial Accounting Standard No.  123  (SFAS  No.
123), "Accounting for Stock-Based Compensation."  Accordingly, no
compensation cost has been recognized for the stock option plans.
Had  compensation cost for the Company's stock option plans  been
determined  based on the estimated fair value at the  grant  date
for  awards in 1995, 1996 and 1997 consistent with the provisions
of  SFAS No. 123, net income and net income per share would  have
been reduced to the pro forma amounts indicated below:

<TABLE>
 
<CAPTION>
     
     
                                              1995           1996        1997
                                        (in thousands, except per share amounts)
     <S>                                  <C>            <C>          <C>

     Net income - as reported              $   172,981    $ 250,679    $ 109,797
     Net income - pro forma                $   171,149    $ 241,729    $  85,804
                                                                                
     Net income per share - as                                                  
       reported
        Basic                              $      1.19    $    1.64    $     .71
        Diluted                            $      1.09    $    1.60    $     .70
     Net income per share - pro forma                                           
        Basic                              $      1.18    $    1.58    $     .56
        Diluted                            $      1.08    $    1.55    $     .55
</TABLE>
                                
     The   pro   forma   effect  on  net  income  for  1995,   1996   and   1997
is   not   fully  representative  of  the  pro  forma  effect  on   net   income
in   future   years   because   it  does  not  take   into   consideration   pro
forma   compensation   expense   related  to  the   vesting   of   grants   made
prior to 1995.

     The   fair   value  of  each  option  grant  is  estimated  on   the   date
of   grant   using   the   Black-Scholes   option   pricing   model   with   the
following    weighted-average   assumptions   used    for    all    grants    in
1995,   1996   and   1997:    dividend   yield   of   zero   percent;   expected
volatility   of   60   percent;   risk-free   interest   rates   ranging    from
5.2   to   7.2   percent;   and  expected  lives  of  the   options   of   three
and one-half years from the date of vesting.
     
                       Gateway 2000, Inc.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     All   options   have   exercise   prices   equal   to   the   fair   market
value   of   the   related  stock  on  the  date  of  grant.    A   summary   of
the    status    of   the   Company's   stock   option   plans   is    presented
below:

<TABLE>
<CAPTION>
                            Year Ended December 31, 1995
                    (in thousands, except per share amounts)
                                                       Weighted-    Class A    Weighted-
                                         Common       Average       Common      Average
                                          Stock        Price         Stock       Price
       <S>                                <C>        <C>               <C>        <C>
                                                                                
   Outstanding, beginning of period        13,650    $   1.37          1,248      $  2.10
       Granted                              1,384       12.14             --           --
       Exercised and converted            (6,253)        1.21          (287)         1.97
       Forfeited                             (42)        6.82             --           --
   Outstanding, end of period               8,739     $  3.16            961      $  2.14
   Options available for grant, end                                                      
      of period                             1,937                         --
   Options exercisable, end of period       7,119     $  1.30            810      $  2.01
   Weighted-average fair value of                                                        
      options granted during the year      $ 7.45                     $  --
</TABLE>
<TABLE>
<CAPTION>
                                        
                                        
                                   Year Ended December 31, 1996
                              (in thousands, except per share amounts)
                                                     Weighted-      Class A    Weighted-
                                         Common       Average       Common      Average
                                          Stock        Price         Stock       Price
   <S>                                   <C>              <C>          <C>         <C>
   Outstanding, beginning of period         8,739         $3.16           962    $  2.14
                                                        
       Granted                              3,260         15.75            --         --
       Exercised and converted            (6,305)          1.43         (241)       2.13
       Forfeited                            (254)         14.15           (8)       3.25
   Outstanding, end of period               5,440        $12.20           713   $   2.12
                                                          
   Options available for grant, end                                                     
      of period                            12,309                          --
   Options exercisable, end of                                                          
      period                                1,283         $4.28           672   $   2.06
                                                           
   Weighted-average fair value of                                                       
   options granted during the year        $  9.65                     $    --
</TABLE>
<TABLE>

<CAPTION>
                                                   Year Ended December 31, 1997
                                (in thousands, except per share amounts)
                                                     Weighted-      Class A    Weighted-
                                         Common       Average       Common      Average
                                          Stock        Price         Stock       Price
                                                                               
        <S>                             <C>                            <C>
     Outstanding, beginning of period       5,440       $ 12.20          713     $  2.12
         Granted                            5,253         36.08           --          --
         Exercised and converted            (463)         11.56        (153)        2.50
         Forfeited                          (775)         23.69           --          --
     Outstanding, end of period             9,455      $  22.98          560    $   2.02
     Options available for grant, end                                                   
        of  period                          8,328                         --
     Options exercisable, end of                                                        
        period                              2,582     $    9.86          556    $   2.01
     Weighted-average fair value of                                                     
        options granted during the                                          
        year                            $  21.61                       $  --
</TABLE>
                                
                       Gateway 2000, Inc.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                
The    following    table   summarizes   information   about    the    Company's
Common Stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
                Options Outstanding                             Options
                                                                Exercisable

      Range of      Number     Weighted-Average                  Number       Weighted-
      Exercise    Outstandi       Remaining       Weighted-   Exercisable      Average
       Prices       ng at      Contractual Life    Average    at 12/31/97       Price
                   12/31/97                         Price
    <C>   <S><C>         <C>          <C>  <S>      <C> <C>            <C>   <C>     <C>
    $1.19 -  1.19        760          3.41 years    $   1.19           760   $       1.19
      6.82 -13.38      2,526          7.72 years       11.73         1,077          10.73
     13.44 -19.69      1,739          8.19 years       17.62           717          17.15
     20.89 -29.44      1,559          9.06 years       28.82            28          25.74
     29.53 -34.44      1,428          9.67 years       32.72             -              -
     35.00 -44.75      1,443          9.56 years       44.66             -              -
</TABLE>
<TABLE>
   
   
     The following table summarizes information about the Company's Class A
     Common Stock options outstanding at December 31, 1997:
<CAPTION>
     
                      Options Outstanding                             Options
                                                                       Exercisable

                                                                                         
    Range of     Number     Weighted-Average                        Number       Weighted-Average
    Exercise   Outstanding      Remaining        Weighted-      Exercisable at        Price
     Prices    at 12/31/97  Contractual Life   Average Price       12/31/97
  <C>   <S><C>         <C>        <C>  <S>          <C> <C>          <C>         <C>     <C>
  $1.86 - 3.24         560        5.07 years        $   2.02         556         $       2.01
   
7.   Retirement Savings Plan:

     The    Company   has   a   401(k)   defined   contribution    plan    which
covers   employees   who  have  attained  18  years  of  age   and   have   been
employed   by   the   Company  for  at  least  six  months.   Participants   may
contribute   up   to   20%  of  their  compensation  in  any   plan   year   and
receive   a   25%  matching  employer  contribution  of  up  to  1%   of   their
annual    eligible    compensation    for    the    first    12    months     of
participation,   and   a   50%  matching  employer   contribution   up   to   2%
of    their   annual   eligible   compensation   for   all   subsequent   months
of    participation.   The   Company   contributed   $640,000,   $871,000,   and
$2,068,000 to the Plan during 1995, 1996 and 1997, respectively.
     
8.   Acquisition:
     
     During    the    third    quarter   of   1997,   the    Company    acquired
substantially   all   of   the   outstanding   shares   of   common   stock   of
Advanced    Logic   Research,   Inc.   (ALR),   a   manufacturer   of    network
servers    and   personal   computers,   for   a   cash   purchase   price    of
approximately    $196,400,000.    Of   the   purchase    price,    approximately
$58,600,000    was   allocated   to   in-process   research   and    development
costs   and   expensed   during   the   third   quarter.    These   costs   were
expensed    as    the    technological    feasibility    of    the    in-process
research   and   development   had   not   yet   been   established   and    the
technology   had   no   alternative   use.    In   addition,   $83,300,000    of
the     purchase     price    was    allocated    to    certain     identifiable
intangibles     (including     intellectual     property,     workforce,     and
customer   base)   and   the   remaining   to   ALR's   net   tangible    assets
which    included   approximately   $58,100,000   in   cash.   The   acquisition
was   accounted   for   as   a   purchase   business   combination.    Beginning
July   23,   1997,   the   results   of  ALR   have   been   included   in   the
Company's     consolidated     financial    statements.      ALR's     operating
results    for    periods   prior   to   the   acquisition   date    were    not
material to the Company's consolidated results of operations.
     
                                
                       Gateway 2000, Inc.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                

9.   Nonrecurring Expenses:

     The     Company    recorded    several    nonrecurring    pretax    charges
during     the     third     quarter    of    1997    totaling     approximately
$113,800,000.       Of      the     nonrecurring     charges,      approximately
$59,700,000    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   approximately   $45,200,000    resulting
from    the    abandonment    of   a   capitalized   internal    use    software
project      and      certain     computer     equipment.      In      addition,
approximately   $8,600,000   was   recorded   for   severance    of    employees
and the closing of a foreign office.

10.  Selected Balance Sheet Information:
                    
                                                         December 31,
                    
                                                     1996          1997
                                                      (in thousands)
Accounts receivable, net:                                                 
        Accounts receivable                       $  468,691    $  530,743
        Allowance for uncollectible accounts         (18,968)     (20,064)
                                                  $  449,723    $  510,679
                                                                          
                                                                          
Inventory:                                                                
        Components and subassemblies              $  269,959    $  215,318
        Finished goods                                 8,084        33,906
                                                  $  278,043    $  249,224
                                                                          
Property, plant and equipment, net:                                       
       Land                                        $  14,888    $   21,431
       Leasehold improvements                          5,096        21,666
       Buildings, including construction in                               
          progress                                    131,180      177,766
       Office and production equipment                144,477      186,281
       Furniture and fixtures                          25,084       42,055
       Vehicles                                         3,754        4,105
                                                                          
                                                      324,479      453,304
       Accumulated depreciation and amortization     (82,114)    (116,835)
                                                  $  242,365     $ 336,469
                                                                          
Internal use software costs, net:                                         
       Purchased software                           $ 33,102       $42,926
       Internally developed software                  71,475        38,486
                                                     104,577        81,412
       Accumulated amortization                      (27,504)     (41,414)
                                                    $ 77,073    $   39,998
     
     Amortization      expense     of     $7,674,000,      $13,591,000,      and
$20,691,000    relating    to   software   costs    was    included    in    the
results   of   operations  for  the  years  ended  December   31,   1995,   1996
and 1997, respectively.
     
                       Gateway 2000, Inc.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                
11.        Supplemental Statements of Cash Flows Information:

</TABLE>
<TABLE>
<CAPTION>
                                
                                 Year ended December 31,
                                                        1995           1996           1997
                                                                  (in thousands)
                 <S>         <C>   <S>               <C>   <C>                       <C>
  Supplemental disclosure of cash flow information: 
         Cash paid during the year for interest       $    2,119     $      665     $      716
         Cash paid during the year for income taxes   $   61,322     $  101,774     $  163,710
  Supplemental schedule of noncash investing and                                              
       financing activities:
         Capital lease obligation/long-term                                                   
           obligations incurred for the purchase of                                           
           new equipment                              $   11,071    $     3,126     $    4,593
         Acquisitions                                                                         
            Fair value of assets acquired             $   12,620                     $ 271,189
            Less:  Liabilities assumed                     9,000                        70,773
                   Cash acquired                               -                        58,096
                 Acquisitions, net of cash acquired  $     3,620                     $ 142,320
</TABLE>

12.  Geographic Data:

     The    Company    operates    in    one    principal    business    segment
across geographically diverse markets.

     Transfers     between     geographic    areas    are     recorded     using
internal    transfer    prices    set   by   the    Company.     The    Americas
operating    income   is   net   of   corporate   expenses.   1995    geographic
data    have    been    restated    to    separately    reflect    the    Europe
geographic area.

     Export   sales   from   the   Americas  to   unaffiliated   customers   are
not material for any period presented.
     
     The     following    table    sets    forth    information    about     the
Company's operations by geographic area.

<TABLE>
<CAPTION>
                                                                                                     
                            Americas      Europe       Pacific      Eliminations   Consolidated
                                                       
       <S>                <C>             <C>           <C>                  <C>      <C>
                                                       (in thousands)
 1997:                                                                             
  Net sales to                                                                                   
 unaffiliated             
       customers           $5,303,828    $634,616      $355,236              $--     $ 6,293,680                    
  
  Transfers between                                                                             
       geographic areas        56,922      16,163        21,071         (94,156)              --
                          
  Operating profit (loss)     198,638     (11,566)      (9,733)            (908)         176,431
  Identifiable assets       1,701,654      187,215      150,402               --       2,039,271
                            
                                                                                                
 1996:                                                                                          
  Net sales to                                                                                   
 unaffiliated             
       customers          $4,246,047      $552,671      $236,510             $--      $5,035,228
  Transfers between                                                           
       geographic areas       30,208        23,538         4,087        (57,833)              --
                                   
    Operating profit                            
     (loss)                   347,348       19,930        (9,946)        (1,238)        356,094
    Identifiable assets     1,349,781      178,988        144,642             --      1,673,411
                           
                                                                                                
 1995:                                                                                          
  Net sales to                                                                                   
 unaffiliated                 
       customers           $3,210,658     $428,107         $37,563         $  --     $3,676,328
  Transfers between                                                                             
       geographic areas           250       40,062              --       (40,312)            --
                      
  Operating profit (loss)     235,259       27,195        (13,019)          (427)       249,008
                            
    Identifiable assets       967,682      124,796          31,533             --     1,124,011
</TABLE>
                                 
                                                                              
                       Gateway 2000, Inc.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


13.  Selected Quarterly Financial Data (Unaudited):

     The following tables contain selected unaudited consolidated
quarterly financial data for the Company:
     
<TABLE>
<CAPTION>
     

                                                                                                       
                                            1st Quarter      2nd Quarter     3rd Quarter    4th Quarter
                                                     (in thousands, except  per share amounts)
           <S>                               <C>              <C>             <C>           <C>
     1997:                                                                                             
           Net sales                         $1,419,336       $1,392,658      $1,504,851    $ 1,976,835
           Gross profit                         265,793          260,358         195,250        355,040
           Operating income (loss)               94,878           79,851       (137,850)        139,551
           Net income (loss)                     67,516           56,483       (107,113)         92,910
           Net income (loss) per share:                                                                
                     Basic                        $ .44            $ .37         $ (.70)          $ .60
                     Diluted                      $ .43            $ .36         $ (.68)          $ .59
           Weighted average shares                                                                     
                 outstanding:                                                                          
                     Basic                      153,557          153,740         153,980        153,840
                     Diluted                    157,291          156,231         156,875        156,526
           Stock sales price per share:                                                                
                    High                       $  32.63         $  37.38        $  44.75       $  36.13
                    Low                        $  23.81         $  26.19        $  31.50       $  25.13
                                                                                                       
     1996:                                                                                             
            Net sales                        $1,142,202       $1,137,262      $1,202,933     $1,552,831
            Gross profit                        212,331          206,171         223,378        294,276
            Operating income                     70,502           70,801          87,757        127,034
            Net income                           50,487           51,352          60,696         88,144
            Net income per share:                                                                      
                   Basic                          $ .33            $ .34           $ .40          $ .57
                   Diluted                        $ .32            $ .33           $ .39          $ .56
            Weighted average shares                                                                    
                outstanding:                                                                           
                   Basic                        151,192          153,126         153,257        153,394
                   Diluted                      155,732          155,922         156,276        157,120
           Stock sales price per share:                                                                
                   High                        $  16.13         $  20.75        $  25.07        $ 33.13
                   Low                        $    9.00         $  13.63        $  13.88        $ 22.32
</TABLE>
<TABLE>
<CAPTION>

                       Gateway 2000, Inc.
         SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
      For the years ended December 31, 1995, 1996 and 1997
                         (in thousands)

                                          Balance at                          
                                         Beginning of     Charged to       from          End of
                                            Period         Expense       Allowance       Period
       <S>       <C>                      <C> <C>         <C>  <C>       <C>            <C>
  Year ended December 31, 1995:                                                       
     Allowance for uncollectible                                              
       accounts (deducted from accounts                                                     
       receivable)                        $   13,900      $    7,779     $ 10,125       $ 11,554
                                                                              
  Year ended December 31, 1996:                                               
     Allowance for uncollectible                                              
       accounts deducted from accounts                                                      
       receivable)                        $   11,554      $  20,832      $ 13,418       $ 18,968
                                                                              
  Year ended December 31, 1997:                                               
     Allowance for uncollectible                                              
       accounts (deducted from accounts                                                     
       receivable)                        $  18,968        $  5,688      $  4,592       $ 20,064
</TABLE>
                                                                              


Item 9.     Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

      None.


                            PART III

Part III of this report is incorporated by reference to Gateway's
definitive Proxy Statement relating to its Annual Meeting of
stockholder's, which will be filed with the Commission within 120
days of the end of fiscal year 1997.


                             PART IV

Item 14.  Exhibits, Financial Schedules and Reports on Form 8-K

(a)  The following documents are filed as a part of this Report:

     (1)    Financial Statements and Financial Statement
            Schedule.   See Index to Consolidated Financial
            Statements and Financial Statement Schedule at Item 8
            on page 17 of this Report.

     (2)    Exhibits.  Exhibits identified in parentheses below,
            on file with the Securities and Exchange Commission
            are incorporated herein by reference as exhibits
            hereto.
<TABLE>
<CAPTION>

  Exhibit                           Description of Exhibits
    No.
   <C>       <S>                                                             <C>
   3.1       Amended  and  Restated Certificate of Incorporation of Gateway  2000,
             Inc.  (Exhibit  No. 3.2 to Amendment No. 1 to Registration  Statement
             No. 3-70618)
   3.2       Amended and Restated Bylaws of Gateway 2000, Inc. (Exhibit No. 3.2 to
             Form 10-K for 1995)
   10.1      Tax  Indemnification Agreement dated as of December 6,  1993  between
             Gateway 2000, Inc., Theodore W. Waitt and the Norman W. Waitt, Jr.  S
             Corp. Trust.  (Exhibit No. 10.1 Form 10-K for 1993)*
   10.2      Indemnification  Agreement  dated as  of  December  6,  1993  between
             Gateway 2000, Inc. and Theodore W. Waitt.  (Exhibit No. 10.2 to  10-K
             for 1995)*
   10.3      Registration Agreement dated February 22, 1991 between Gateway  2000,
             Inc.,  Theodore W. Waitt and Norman W. Waitt, Jr. as the sole trustee
             and  sole  beneficiary of the Norman W. Waitt,  Jr.  S  Corp.  Trust,
             together with Amendment No. 1 to the Registration Agreement dated  as
             of October 19, 1993 (Exhibit 10.11 to Form S-1)*
   10.4      Gateway  2000,  Inc. 1992 Stock Option Plan.  (Exhibit  No.  10.4  to
             Registration Statement No. 33-70618 (the "Form S-1")*
   10.5      Gateway  2000,  Inc.  1993 Stock Option Plan for Executives  and  Key
             Employees.  (Exhibit No. 10.6 to the Form S-1)*
   10.6      Gateway  2000, Inc. 1993 Non-Employee Director Stock Option Plan  and
             Form of Option Grant Letter (Exhibit No. 10.8 to the Form S-1)*
   10.7      Gateway  2000,  Inc.  1993  Employee  Stock  Purchase  Equity   Plan.
             (Exhibit No. 10.9 to the Form S-1)*
   10.8      Gateway  2000, Inc. 1996 Long-Term Incentive Equity Plan, as  amended
             and restated (filed herewith)*
   10.9      Gateway  2000,  Inc. 1996 Non-Employee Directors Stock  Option  Plan.
             (Exhibit  No.  4.3  to Registration Statement on Form  S-8  No.  333-
             08837)*
   10.10     Gateway 2000, Inc. Management Incentive Plan as (Exhibit 10.9 to  the
             Form 10-K for 1996)*
   10.11     Gateway 2000, Inc. Deferred Compensation Plan (Exhibit 10.10  to  the
             Form 10-K for 1996)*
   10.12     Gateway  2000, Inc. Retirement Savings Plan.  (Exhibit No.  10.16  to
             Form 10-K for 1995)*
          

   Exhibit    Description of Exhibits
     No.
  10.13      Credit Agreement dated as of December 27, 1995 between Gateway  2000,
             Inc.,  Norwest  Bank  Iowa, National Association,  as  Administrative
             Agent,  and  certain financial institutions named therein.   (Exhibit
             No. 4.2 to Form 10-K for 1995)
  10.14      1997 Amended and Restated Credit Agreement dated as of September  25,
             1997  among the  Company, the banks party thereto, Norwest Bank Iowa,
             N.A., as Administrative Agent and Bank of America National Trust  and
             Savings Association as Documentation Agent  (Exhibit 10.13 to Form 10-
             Q for period ended September 30, 1997)
  10.15      Consultation and Noncompetition Agreement dated as of August 28, 1997
             between the Company and Richard D. Snyder.  (Exhibit 10.14 to Form 10-
             Q for period ended September 30, 1997)*
  10.16      Employment  Agreement between Gateway 2000, Inc. and Jeffrey  Weitzen
             dated January 22, 1998, filed herewith.*
  10.17      Employment Agreement between Gateway 2000, Inc. and David  J.  Robino
             dated January 22, 1998, filed herewith.*
  21.1       List of subsidiaries, filed herewith.
  23.1       Consent of Coopers & Lybrand L.L.P, filed herewith.
  24.1       Powers of attorney, filed herewith.
  27.1       Financial  Data  Schedule  and  Financial  Data  Schedules   restated
             pursuant to SFAS 128, filed herewith (EDGAR version only).
</TABLE>

 *Indicates a management contract or compensatory plan.

     Gateway  will  furnish  upon request any  exhibit  described
above   upon   payment  of  Gateway's  reasonable  expenses   for
furnishing such exhibit.

(b)    Reports on Form 8-K.

              No reports on Form 8-K were filed by Gateway during
     the quarter ended December 31, 1997.

This  report contains the following trademarks and service  marks
of  Gateway,  many  of which are registered: AnyKey,  "BLACK  AND
WHITE SPOT" Design, CrystalScan, Destination, gateway.net, Family
PC,  GATEWAY  2000,  Gateway Country, Gateway Gold,  "G"  Design,
TelePath, Gateway Solo, Solo,Vivitron and "You've Got a Friend in
the  Business".  The following trademarks of other companies also
appear in this Report:  Intel, IBM, Microsoft and Pentium.  These
and  any  other  product  or  brand names  contained  herein  are
trademarks or registered trademarks of their respective owners.

                           SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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, in the City of North Sioux City and
State of South Dakota, on March 24, 1998.
     
                                   GATEWAY 2000, INC.

                                   By:/s/ Theodore W. Waitt
                                      Theodore W. Waitt
                                      Chairman of the Board and
                                      Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant in the capacities indicated
on the dates indicated below:
<TABLE>
<CAPTION>
     

     Date              Signature                                 Title
                                          
<C>   <C> <C>     <C> <S>                          <C>     <S>
March 24, 1998 /s/ Theodore W. Waitt      Chairman of the Board, Chief Executive
                   Theodore W. Waitt           Officer (Principal Executive Officer )and
                                               Director
                                          
March 24, 1998    /s/ Jeffrey Weitzen     President, Chief Operating Officer and Director
                    Jeffrey Weitzen       
                                          
March 24, 1998  /s/ David J. McKittrick   Senior Vice President, Chief Financial Officer
                  David J. McKittrick           and Treasurer (Principal Financial Officer
                                                and Principal Accounting Officer)
                                          
March 24, 1998             *              
                   Charles G. Carey        Director
                                          
March 24, 1998             *              
                   James W. Cravens        Director
                                          
March 24, 1998             *              
                   George H. Krauss        Director
                                          
March 24, 1998             *              
                   Douglas L. Lacey        Director
                                          
March 24, 1998             *              
                    James F. McCann        Director
                                          
March 24, 1998             *               Director
                   Richard D. Snyder      
</TABLE>
                                          

* By: /s/ William M. Elliott
      William M. Elliott
      (Attorney-in-fact)