And perhaps more significantly, the company states that, excluding acquisition costs, it managed to pull off an operating profit at the end of the year by selling Internet service provider (ISP) contracts to customers.
Emachines, which burst onto the scene in late 1998 with low-cost PCs, submitted a revised filing with the Securities and Exchange Commission that reflects the company's financial results for 1999, including the cost of its acquisition of Free-PC. The filing is a prelude to an IPO.
The company's IPO had been put on hold in November so the company could finish its acquisition of Free-PC, which gave free computers and Internet access to customers willing to accept on-screen advertising. Emachines first filed to go public in August of 1999.
Emachines had pro forma losses of $108.5 million on revenue of $815.5 million for the year ending Dec. 31, 1999, including goodwill amortization of the merger, according to the filing. Excluding those costs, the company posted a loss of $1.89 million on $814.3 million in sales. In all, Free-PC added about $1.2 million in revenue during the year to Emachines' results.
Interestingly, however, Emachines said it reached profitability in the fourth quarter of 1999, registering $2.2 million in net profits on $307 million in revenue. The majority of the profit came from fees garnered from Internet service contracts sold with PCs--something that the company hopes to eventually increase through the use of technologies and alliances in the merger.
Although Emachines had racked up significant market share in its short life, several analysts have been skeptical of the company's ability to create a sustainable business model. One of the company's main selling points has been low prices.
The filing also revealed what the company paid for Free-PC: approximately $142 million in an all stock transaction, according to the filing. In essence, customers of Free-PC that received a computer really did get a free computer because Emachines is writing off the cost of those assets, according to the filling.
Free-PC's advertising and e-commerce deals will become a part of Emachines' offerings, according to the filing. In other words, in exchange for a lower cost PC, customers may see targeted ads on their systems. Emachines also hopes to make money by having companies pay for links between special keys on the PC's keyboard that would automatically take a customer to a Web site.
The fruits of the combined companies are not expected to be seen on Emachines PCs any earlier than the second quarter of the year, when revised systems are expected to be announced, representatives have stated previously.
Meanwhile, Emachines said it expects to post a loss for the next several quarters.