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Softbank invests in low-cost PC firm

PeoplePC, a start-up offering consumers a computer and unlimited Internet access for $24.95 a month, will announce that it has secured $65 million in funding.

PeoplePC, a start-up offering consumers a computer and unlimited Internet access for $24.95 a month, will announce on Monday that it has secured $65 million in funding from an investment group led by Softbank Capital Partners.

Terms of the deal have not been disclosed.

PeoplePC is the latest See special report: PC free-for-all company to bet on a risky strategy that hopes to make money by offering consumers greater access to the Internet and burgeoning e-commerce markets.

The trend began only months ago when then-unknown Free PC announced it would give away 10,000 desktop computers.

A slew of imitators soon followed, despite deep reservations among some analysts about the viability of this business model.

PC start-ups such as Emachines, which sells computers that cost practically nothing when purchased with the CompuServe subscription, and free ISPs like NetZero have become overnight celebrities in consumer marketing circles. FreeMac says 500,000 people have applied to take advantage of the company's free iMac offer.

Although precise details of PeoplePC's plans were unavailable today, the company said the additional funding will support an aggressive member acquisition marketing plan, strengthen branding campaigns, and expand existing programs and initiatives. The company said it has already formed partnerships with Compaq, Toshiba, MCI WorldCom, E*Trade, and 1-800-Flowers.com.

In additional to an infusion of cash, the investment gives the company a vote of confidence from one of the most prolific and successful names in Internet start-up funding, Masayoshi Son, Softbank's founder and CEO. Under his leadership, Softbank has taken direct and indirect stakes in more than 100 U.S. and international companies doing business online, including Yahoo, E*Trade, and publisher Ziff-Davis.