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Over the years Waitt fought to maintain the company's farmland roots. He kept headquarters in South Dakota and built a famously easygoing culture. Rock music blared on the manufacturing floor. Cow spots adorned the company's shipping boxes. He'd regularly visit call centers and assembly lines and was renowned for popping onto a sales floor, grabbing a headset, and taking customer calls. A dynamic and charismatic leader, Waitt was--and is--wildly popular with his troops. "He's a normal dude, an everyday guy you'd go out and have pizza with," explains Marlene Metcalf, a shipping operator in Salt Lake City.

But as the company grew, Waitt reluctantly came to believe--with some prodding from Wall Street--that it needed more guidance than he could provide. What it needed was professional, big-company management. So in January 1998 he hired Weitzen, AT& T's business markets chief, to groom as Gateway's next CEO.

By all accounts, Waitt and Weitzen hit it off at first--as business partners and as friends. "Jeff and I had a very close relationship," recalls Waitt. (When contacted by Fortune for a response to Waitt's comments, Weitzen didn't call back.) They went to rock concerts together, played golf on weekends, and socialized frequently with each other's families. In business matters, "Jeff and Ted were reading each other's minds," says Brad Smart, a corporate recruiter who helped Waitt hire Weitzen.

They developed what seemed to be an ideal partnership. Weitzen, a serious-minded and disciplined strategist six years Waitt's senior, was the perfect foil to Waitt and his folksy, homespun style. He brought managerial experience and sophistication that Waitt lacked. He introduced Gateway to Six Sigma quality procedures. He improved the company's financial discipline, requiring every department to draft a budget, for example. He also helped Waitt map out a strategy--Beyond the Box--under which the company began bundling services such as Internet training and financing with its PCs. The partnership worked well: Under their leadership, from the beginning of 1998 to the end of 1999, sales grew 37%, net income nearly tripled, and the company's share price quadrupled.

Despite Waitt and Weitzen's rapport, tension was rife further down the management ranks. As Weitzen increasingly took control, he recruited a slew of new, high-level managers from such venerable companies as AT&T, GE, Nike, and PepsiCo. A rift emerged between them and Waitt's team. The old-timers felt the new guys were turning Gateway into a stodgy corporate bureaucracy, filled with memo writing, managerial procedures, and endless meetings. Bart Brown, who quit in December, says, "The week [before] I left Gateway, I was on conference calls for 26 hours." Waitt recently rehired Brown to run the consumer division. Mike "Hammer" Hammond, Gateway's first employee (recently reappointed operations chief), describes how decisions got made with the newcomers around: "You'd schedule an appointment, do some PowerPoints, do your presentation--if the meeting didn't get rescheduled--and you'd get asked a bunch of questions, and then you gotta come back with the answers."

For their part, the new management team viewed many of the old-timers as undereducated rubes unfit to run a major corporation. "These are guys that would show up to meetings barefoot; they'd drink beer in the office," sniffs one of Weitzen's recruits, who spoke on the condition of anonymity. "They had no training. They didn't even have college degrees." (Like Waitt, neither Hammond nor Brown graduated from college.) Tensions crystallized when the company moved its corporate headquarters from North Sioux to San Diego in 1998 to improve recruiting. A number of top old-timers, including Hammond and Brown, refused to leave South Dakota, in part because they knew Waitt soon wouldn't be in charge.

The real trouble, however, didn't begin until after Dec. 31, 1999, the day Waitt left the CEO post to become chairman of the board. New CEO Weitzen had none of Waitt's rapport with the troops. Quiet and contemplative, he spent much of his time behind closed doors mapping out strategy. He didn't "walk the halls," as one Gateway insider put it. "That other guy didn't come around much," says Brad Beavers, an assembly-line worker in North Sioux, who couldn't recall Weitzen's name. ("It wasn't mentioned much around here.")

Shortly after Waitt departed, Weitzen began freezing out many old-time Gateway managers. Hammond got demoted from operations chief to head of quality. Brown got pushed from running the consumer division into a series of lesser roles before he quit. Supply-chain chief Dave Russell left too. Many who stayed grew demoralized. "There was a point where I was asking myself, 'Ted's not here, the company doesn't seem to be going in the right direction--how much longer do I want to do this?'" recalls Shane Hartnett, Gateway's sixth employee, who runs the manufacturing floor in North Sioux.

Distanced from the troops, Weitzen set up a series of widely hated policies and procedures that dictated everything from what posters employees could put up in their cubicles to the exact time they could go to lunch. A customer-service rep recently complained that her lunch hour had been set at 9:30 a.m. A sales manager recalls the torture of two-hour daily conference calls that sales managers were required to attend. It was, some workers groused, the "AT&T-ification" of Gateway.

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