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Emachines to offer rebates on MSN Net appliance

Microsoft and the discount PC seller announce $400 rebates that will subsidize the cost of Emachines' upcoming Internet appliance.

Microsoft and discount PC seller Emachines added a new chapter to the ongoing saga of the "free PC" movement Monday by announcing rebates that will subsidize the cost of Emachines' upcoming Internet appliance.

Emachines is one of several PC makers building stripped-down computers designed to hook up to the Internet via the Microsoft Network. Compaq Computer introduced its version of the MSN Web Companion in August, and similar appliances featuring America Online will come out from other manufacturers later this year.

The Emachines version will go on sale by the end of the month at Circuit City, Office Depot, Wal-Mart and other major retailers, the companies said in a statement. The units will sell for $349, but customers who sign up for three years of service from MSN at $21.95 a month will be eligible to receive a $400 rebate.

Rebates connected to Internet service became popular in 1999 as a way to drive hardware sales and garner ISP subscribers. With the rebate, Microsoft is effectively subsidizing the cost of the hardware.

Emachines earns its revenue and any profit from selling the $349 unit. The company does not participate in providing the rebate, nor does it take a cut of any monthly Internet service fees, a Microsoft spokesman said.

The Emachines device will use National Semiconductor's Geode processor and Windows CE, Microsoft's stripped-down version of the operating system for non-PC appliances. It comes with a keyboard, mouse and built-in 56-kbps modem, but no monitor.

Although these Internet devices cost slightly less to manufacture than standard PCs, analysts have questioned the viability of such limited-function appliances. The cost difference remains fairly negligible, and over half the homes in the United States already have PCs.

Netpliance, one of the few publicly traded companies specializing in such devices, has struggled to boost sales and its sagging stock price since introducing its I-opener appliance early this year.