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Emachines posts a wide loss

Losses for the maker of low-cost PCs fall within the company's own lowered expectations but contrast sharply with results from a year earlier.

Earnings for low-cost PC maker Emachines fell within the company's own lowered expectations Thursday.

Emachines
Stock price from February 2000 to present.  
Source: Prophet Finance
Excluding charges, the company lost $31.2 million, or 21 cents per share--well below last year's results. In the same period a year earlier, the company had a profit of $2.2 million, or 2 cents per share.

Including extraordinary charges, such as those related to amortization of assets and stock-related compensation, the loss came to $97.8 million, or 68 cents a share.

Revenue for the quarter was $134.8 million, less than half that in the same period a year earlier.

In December, the company issued an earnings warning and said it expected to lose 19 cents to 23 cents per share on revenue of $120 million to $130 million.

Before the warning, two analysts surveyed by First Call were expecting the company to lose 4 cents per share. According to First Call, the analysts did not change their forecast after Emachines' warning.

In a cryptic conference call with analysts Thursday, Emachines declined to explain its results or its outlook. Instead, company executives read the earnings press release and said the company would provide a more complete outlook in two weeks.

In a statement, however, CEO Stephen Dukker reasserted his optimism about the company.

"While we were disappointed with the level of fourth quarter revenues, we are pleased with the overall progress of our key business initiatives during 2000, particularly in light of the decline in consumer spending and general economic climate," Dukker said.

Despite the current slowdown, the company said it is "comfortable" with the current estimates for its performance over the next two quarters.

On Thursday, the company's shares closed up 3 cents, or 6 percent, at 53 cents. But in after-hours trading, they dropped to 45 cents.

Nearly every PC maker is feeling the pinch of slowing demand these days, but for Emachines it is a particularly painful time. The company specializes in low-cost consumer computers, one of the segments that has been affected the most by an economic slowdown that began last summer.

The fourth quarter is generally a strong one for PC sales, but this year it didn't pan out for most PC makers. Emachines sold just 311,000 units in the fourth quarter of 2000, which is a 49 percent decrease compared with the same period a year earlier, according to the company.

In its statement, the company said it does not plan to move away from the model of selling cheap PCs via retail stores. And earlier this week, the company announced that it will ship a 1GHz desktop PC, the eMonster 1000Biz, in the second quarter for $799.

Last year, however, Dukker said the company would explore the direct market in early 2001 while continuing to sell in the retail market.

Emachines also announced that Trading on thin iceit plans to eliminate all of its $400 rebate programs in the third quarter. Consumers currently receive a $400 rebate when they purchase an Emachines system if they agree to sign a three-year contract with a designated Internet service provider.

Emachines received a warning from the Nasdaq late last year that the company's stock may be delisted. Emachines has until March 20 to get its stock price trading above $1 for 10 consecutive days or it will be delisted.