Excluding a host of charges related to its transition to a new CEO and other restructuring moves, the Irvine, Calif.-based company lost $22.1 million, or 15 cents per share, on revenue of $136.2 million. Emachines had a profit of $737,000, or 1 cent per share, on revenue of $249.8 million in the first quarter of 2000.
JP Morgan H&Q, the sole brokerage still covering the stock, had projected a loss of 15 cents a share, although that estimate was made before the latest restructuring.
Including the charges, the company lost $31.1 million, or 21 cents per share, for the quarter ended March 31.
Emachines said its losses stem from "substantial sales discounts and incentives" given to retailers to help liquidate a glut of inventory.
"We are disappointed with the costs we have incurred during this inventory reduction process, and expect it to be completed early during the second quarter," CEO Wayne R. Inouye said in a statement. "Nevertheless, we are very pleased with the financial health of our balance sheet, which will enable us to progress towards our goal of achieving robust inventory turns and profitability."
Emachines said it improved its cash position during the first quarter, with $155.5 million in cash and short-term investments, up from the $112.9 million it reported at the end of 2000. The improvement came, in part, from sales of inventory and the collection of receivables that were on the books at year's end.
Emachines said it sees sales in the current quarter "consistent" with those in the first quarter. However, due to the continued liquidation of inventories, the company said its net loss "should only show slight improvement over the first quarter of 2001," excluding charges.
The company added that during the current quarter it will test its new direct sales effort through the launch of an infomercial. Emachines said it expects the limited effort to have a neutral effect on the company's financial results.
Emachines said it anticipates "continued sales weakness" in the third quarter and a "return to more seasonal levels" in the fourth quarter.
"Sales in the third quarter should show some improvement over the prior preceding quarters of 2001, and losses should greatly narrow as Emachines implements its strategies to improve inventory turns and reduce operating expenses," the company said in a statement. Emachines said it is comfortable with the published earnings estimate of a loss of about 7 cents per share for the second half of 2001.
However, the company still faces delisting from the Nasdaq because of its low share price. Shares of Emachines closed Wednesday at 33 cents, unchanged from the previous day.