Start-up Enchilada stops accepting PC orders

Enchilada, which joined the "free PC" trend in April, will not sell any more of its discounted PCs, according to a company message.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
3 min read
The "free PC" revolution seems to be running into trouble.

Enchilada, a start-up that began to advertise "free" and discounted PCs in April, has stopped accepting orders, according to a company message and a source close to the company.

A message on Enchilada's toll-free line states that it has stopped selling PCs. Customers who have ordered PCs--but who won't actually get them--won't be charged, the message emphasizes.

"They are serving their existing customers, but they are not taking any new customers," said an Enchilada spokesperson. He would not comment on what occurred at the company but said that Enchilada is "probably" out of the PC business for good. Some customers who placed orders, but haven't been able to contact the company, are outraged.

The Enchilada saga may come to symbolize the dangers inherent in the evolving free-PC strategy. Technically, the PC is not really free in these offers. Instead, hardware makers, Internet service providers, or retailers merely provide the hardware to consumers at steep discounts.

In exchange, consumers must agree to long Internet service contracts, participate in multilevel marketing organizations, or allow advertising to be sent to the PC. The costs of the PC, and any profit, essentially get recovered through service revenues.

A message on Enchilada's Web site reads: "We're sorry, we are experiencing technical difficulties." There are no links on the site to more information. Calls to Enchilada's chief executive have not been returned.

Angry customers
Enchilada's actions have irked many customers who haven't received PCs or definitive answers from the company.

"I have a friend [who] sent a certified check for the 'Enchilada Grande' package, certified mail, return receipt requested. To this day he has received no computer, no response, their Web site is down," wrote one person in an e-mail. "And their toll-free 1-888-Enchilada alludes to an address for inquiries--no operators anymore. I recommended this offer to a friend for his first PC, and he is about to kill me."

Another Enchilada customer wrote: "Each time that I called them I was told that someone would get back to me within 48 hours. No one ever called me back. This company, as far as I am concerned, is a bogus company." The customer sent Enchilada a credit card number, but no charge was made.

A number of major companies, including Microsoft, IBM, Compuserve, and Circuit City, recently launched subsidized PC deals to capture the consumer excitement generated by the trend.

The movement, however, was created by a slew of unknowns seeking fame, riches, and market share. The concept officially kicked off on February 8 when FreePC said it would give away 10,000 PCs to customers who agreed to receive ads. Microworkz followed in March with a $299 PC with a free year's of Internet service from Earthlink.

Hit with a flood of orders
Enchilada is not the first company to stumble when faced with rampant consumer desire for a free computer. Both DirectWeb and Microworkz got stung by a flood of orders, resulting in product backlogs.

"Coming from the hole we just cleared, there were some nightmare stories...It's regrettable, but we have worked our way out of the problems," Microworkz chief executive Rick Latman said at the time.

Customers also complained about terrible customer service: emails seeking the status of orders not being returned, refunds taking weeks, unexplained delays, a lack of telephone support lines, and high shipping charges.

Enchilada, which is owned by a company called The Simple Solution, announced its offer on April 28. The company, founded by executives formerly from New York's garment district, offered customers a free PC if they agreed to four years of ISP service at $19.95 a month. Customers could also pay for the whole package in advance for $799 or get more performance-oriented PC packages.

In June, the company introduced a $399 PC with three free years of Internet access. "The whole Enchilada is now a whole lot tastier," the CEO said in a prepared statement at the time.

As with a number of these start-ups, however, Enchilada had troubles delivering, according to customers.