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Are wired workers productive workers?

Although they once touted PCs as the ultimate means to enable employer-employee communication, some companies believe that a wired work force results in few tangible benefits.

Gary Duncan, who works in a metal-stamping plant in suburban Chicago, used to turn on his antiquated home computer to "waste time" playing solitaire. So when Ford Motor offered him an upgrade and subsidized Internet access, he was skeptical.

But the 47-year-old president of United Auto Workers Local 588 quickly learned how to trade stock and check his 401(k) account online, and he became a digital photography enthusiast.

"It has opened up a whole new way of life for me in terms of photography," said Duncan, who lives in Crete, Ill. He has become such a convert that he would subscribe to broadband access, "but it's not offered out here."

It has been more than a year since corporate America embraced the idea of the so-called wired work force, creating programs that offer free PCs and subsidized monthly Internet access fees to employees. Workers ranging from factory workers to pilots praise the programs. They credit them for boosting computer literacy, enabling them to work from home, and even helping spouses and children learn about the Internet.

But others have begun to question whether bringing the power of PCs to the people will yield more productive, loyal workers over the long term. Meanwhile, employers have struggled to quantify the benefits. Although they once touted PCs as the ultimate means to enable employer-employee communication, many companies admit that a wired work force results in few tangible benefits--and some unanticipated headaches.

For example, some employers have had to fortify security systems to protect work-related e-mail accounts and intranets from non-employees who have access to the company-subsidized PC. They've also had to deal with lengthy backlogs as computers are delivered, sometimes randomly, to thousands of workers. Tax codes in foreign countries have also made it more difficult to implement programs abroad--an irony, considering that overseas workers would likely benefit tremendously from more ways to communicate with U.S. colleagues.

"Ford in particular talked about using the Internet as a key communications channel so employees would get fewer things in the mail, but I'm not sure how much of that is actually taking place," said Joe Laszlo, broadband analyst at New York-based Jupiter Media Metrix. "It has been slower for that kind of benefit, slower cutting down on paperwork. It's still a potential benefit (but) hasn't become an actual benefit yet."

Does the business model work?
Another worry for proponents of wired work forces is that some high-profile companies that provide the PCs are struggling, raising concerns about the long-term feasibility of the programs.

Though the economic slowdown has stung the broader technology sector, Wall Street has questioned whether selling home PCs to corporate customers is a viable business model.

Stock price from June 2000 to present.  
Source: Prophet Finance
Shares of PeoplePC, one of the few companies still providing computers for such programs, closed Friday at 21 cents, down 30 percent since the beginning of June and 72 percent since the beginning of the year. As a result, it has dropped off analysts' radar screens, so few investment banks are pushing the stock.

Stock in Emachines, which provides inexpensive computers to corporate and other clients, closed Friday at 22 cents, down 40 percent since the beginning of the year and down 98 percent since its $10-per-share initial public offering in March 2000. In May, it was delisted from the Nasdaq Stock Market and now trades on the over-the-counter bulletin board because the Irvine, Calif.-based company couldn't maintain a minimum price of $1.

Analysts say the companies started with a good idea--computers for the masses--but may have become casualties of their own success. Corporate clients may one day manage their own wired work force programs or negotiate directly with manufacturers for PCs. As soon as current contracts expire, skeptics say, corporate clients could deal directly with Dell Computer, Gateway or Hewlett-Packard.

"If I have some doubts about their long-term survival, I can't imagine that Ford and Delta don't have the same concerns," said John Metz, analyst and executive vice president with Sterling, Mass.-based Sterling Research. "There's nothing to keep Ford, Delta or these other bright companies from negotiating better deals with Dell, Gateway, whoever. At 25 cents a share, I don't think major corporations in America are going to have much faith in them."

Representatives from Ford and Delta emphasized that they have no immediate plans to stop working with PeoplePC. They said the PeoplePC deal allows them to focus on their own core competencies--building cars and operating an airline.

Stock price from June 2000 to present.  
Source: Prophet Finance
But Ron Iori, Ford's director of global operations, said the company has had trouble delivering PCs outside of the United States. Supply-chain kinks were further complicated by tax codes in some foreign countries that penalized individuals or companies who received or subsidized the PCs.

PeoplePC has delivered 166,000 computers to Ford workers throughout the United States, completing the domestic program for Ford. When the free PCs were offered, roughly 90 percent of eligible Ford workers signed up.

"It has worked so far, and so it's going along as we expected," Iori said. "I don't think it's a matter of worry over where their stock is trading. We deal with a lot of suppliers with a lot of issues."

Nick Grouf, founder, chairman and chief executive of San Francisco-based PeoplePC, said his company's stock reflects little more than the general spurning of tech stocks on Wall Street. He expects PeoplePC's stock to rise as the economy recovers and the company, which has placed more than 500,000 PCs in individual homes, announces more contracts with high-profile corporations.

PeoplePC, which plans to be profitable in the second half of 2001, announced in December a deal to offer computers and Internet service to about 250,000 employees of French media giant Vivendi Universal, the company's first major European contract. The contract came after the French government axed an old regulation taxing corporations that purchase home PCs for employees. The new code, which PeoplePC and Vivendi helped through the legislature, allows companies to release home PCs and Internet access tax free in the next two years.

Wall Street is also still digesting the company's recent business model switch, Grouf said. About a year ago, nearly 100 percent of PeoplePC customers signed up for individual contracts. Now, roughly two-thirds are from corporate accounts.

A year ago, the company was losing money on every sale, but now gross profit margins are in excess of 20 percent, and it had about $50 million in the bank last quarter. PeoplePC is also expanding as a sort of co-branded portal with its corporate clients. When individual users log in, the first page they see is a customized site from PeoplePC and the employer.

"We're making money on the corporate programs and further monetizing our relationship with these customers over the relationship period," Grouf said. "They started by saying, 'Help us wire our employees.' They're so pleased with the traction that they're now saying, 'Gee, this is a fantastic way to build a direct digital relationship with our customers.'"

Free PCs: A family affair
There's no doubt that workers love the wired work force concept.

Typically, employees receive a PC within about two to three weeks of signing up for the program. They usually can pick a basic computer for free or can pay an extra fee for more horsepower or a better monitor. They also pay anywhere from $5 to $12 a month for Internet access, or they can buy broadband access on their own.

Before the work force at Delta Air Lines was wired, pilots and flight attendants--many of whom did not live near Atlanta--had to travel to the company's headquarters to schedule flights. Now they handle all personnel scheduling over a virtual private network.

At Ford, workers use their company-subsidized PCs to find information about their Ford stock, 401(k) plans and bank accounts. Engineers go into online chat rooms to find out what people think of the vehicles they build. Managers keep up-to-date by searching for Ford news stories around the world.

The programs have also been a boon to workers' spouses and children, who are free to use the machines as they wish. Ford and Delta, PeoplePC's largest corporate customers, have no restrictions on their employees' home machines, though they require employees to apply for passwords for confidential, work-related sites and e-mail.

Ed Dorey, a 34-year-old system administrator at Ford's St. Louis assembly plant, was in charge of offering PCs to 2,700 workers at the plant. About 88 percent of them accepted the deal and received computers through PeoplePC, and almost half of them were getting a home PC for the first time. His PC, like many of his co-workers', is often the domain of his children.

"My 10-year-old daughter's into it the most," Dorey said. "Once you get a computer in the house, the whole family uses it."

That's part of the reason some companies aren't offering workers PCs.

General Motors and DaimlerChrysler considered plans to give workers PCs but changed gears after the automakers found that those workers who would most benefit from a home PC already had them. Instead of giving PCs, GM and DaimlerChrysler announced a deal in November to subsidize AOL membership for employees, allowing workers to pay as little as $3 per month.

Delta spokesman Kip Smith was quick to admit that Delta workers' family members are definitely using the machines--and not necessarily boosting the bottom line for the company while doing so. Smith would not say how much Delta spent to wire its work force, and he wouldn't confirm whether the program was a money-losing venture.

"I'm not sure you could classify it as that," Smith said. "We consider it an investment in our people."

David Link, vice president of the eWorkplace division of Baltimore-based technology consulting firm Cedar, said furnishing workers with home PCs translates into happier workers--and a more profitable company.

"We think there is definitely a large hard-dollar savings," Link said. "If you give a PC to every employee, they'll be more satisfied. Many CEOs and CFOs would say, 'So what?' But data now shows that if you make employees happier, they'll sell more towels or tires. They'll treat consumers better. It will enhance productivity. That means something."

But Joseph Tecce, a psychology professor at Boston College and an expert on computer-related stress, said home PCs could actually hurt employee morale. Ford and Delta emphasized to workers that the home PCs were not meant to increase their workload or entice them to send e-mail after they leave the office. But managers know that many workers are using the PCs to complete work they couldn't do during the business day.

That, Tecce said, could ultimately undermine the very productivity and satisfaction that initially comes with wired work force promotions.

"If you get one leg up on tomorrow's work by doing something after supper, you go to work feeling a little ahead of the crowd. You feel pretty good. In that case, you're happier," Tecce said.

"Work doesn't suffer immediately, but your family will get a bloody nose. Then there could be friction in the home," Tecce said. "In the long term, the person could get resentful of his job and quit. The job satisfaction over the long term will be reduced."

Link agreed that simply giving out computers may not boost communication or productivity between employers and employees. He said that companies must deliver computers with software already installed that allows workers to access 401(k) information, work schedules and other human resource information.

Any problems associated with the wired work force concept, Link said, are likely a result of the employer not fully comprehending its potential--not a fault of the underlying business theory.

"If you don't have these corporate applications ready when boxes start showing up on employees' porches, you might miss an opportunity to engage employees," Link said. "They'll just start playing solitaire and popping in Barney CDs."