[discostu]

Too much horizontal expansion into areas where they were weak. First the stores which put them in direct competition with Circuit City and Best Buy, a competition they couldn't win because the others sold software; then they started branching into other electronics (like TVs) thus putting themselves in competition with still more retailers all of whom had better selections and more expertise.

Horizontal expansion works best when you can really leverage, which they couldn't, or when you're expanding into under populated space, which they didn't.

[lelio]

First the stores which put them in direct competition with Circuit City and Best Buy

Adding to that: Gateway's new CEO is a former Best Buy exec and Best Buy sells the eMachines line, which Gateway just purchased.

They'll probably setup a Gateway store inside of Best Buy.