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eMachines misses analysts&#039 lowered 2Q expectations

eMachines (Nasdaq: EEEE) met the low end of its own downwardly revised second quarter target and missed the consensus analyst estimate by a penny.

After market close Wednesday, the maker of cheap PCs reported a fiscal second quarter loss of $47.4 million, or 33 cents per share, excluding amortization. Last month, eMachines warned it would lose between 30 and 33 cents per share for the quarter ended July 1, far worse than previous expectations of a loss of a penny per share.

Following the June announcement, the three analysts polled by First Call lowered their forecasts to produce a consensus estimate calling for a loss of 32 cents per share.

Shares of eMachines traded at $2.65 in afterhours activity on the Island electronic communications network, following the quarterly report. eMachines stock closed Wednesday's regular trading at 2 29/32, up 5/32 for the session.

Including all charges, eMachines lost $62.5 million, or 43 cents per share.

Second quarter revenue of $124.5 million represented a 41.8 percent drop from $213.9 million in the comparable period a year earlier. eMachines wrote down "substantial" amounts of inventory to clear a retail channel glut expected to run into the third quarter.

Unit shipments slid 29 percent year-over-year. Average selling prices fell 11 percent as eMachines discounted machines to spur sales. However, the company cited PC Data figures showing eMachines with market share gains both sequentially and year-over-year.

Despite tumbling PC sales, Internet revenue fell just marginally to $3.2 million from $3.4 million in the first quarter. eMachines has long said it wants to develop ongoing revenue streams beyond initial PC sales.

The company reiterated earlier statements blaming its second quarter disappointment on economic uncertainty and lower consumer confidence for lower PC sales. eMachines said it also faced a difficult comparison with last year's second quarter, when retailers filled their inventory early ahead of a program offering $400 ISP rebates.

"Although this has been a challenging quarter, we have made the necessary corrections and are performing according to our revised plan," said Stephen A. Dukker, president and CEO. "Our sales are now on track based on these actions, including in-store discount promotions designed to stimulate consumer interest, and our retail partners' sales are accelerating as well. These initial indications point to a level of consumer spending that will be more consistent with market expectations in the current quarter."

First Call consensus currently predicts an eMachines loss of 4 cents per share for the third quarter.

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