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AOL forges deal with eMachines

Alliance to promote Compu$erve, paves way for AOL-brand Net appliance

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AOL today announced it has struck a major deal with budget-priced PC manufacturer eMachines, and while the arrangement isn't perhaps as interesting as the online supremo's talks with Microworkz, it's just as important to AOL's 'AOL anywhere' strategy. The eMachines arrangement centres on placing AOL's access software and that of its subsidiary service CompuServe onto eMachines' PC desktops. Curiously, the deal places more emphasis on CompuServe 2000 than on AOL itself, so clearly AOL is keen on maintaining the CompuServe brand's separate identity and that after years of trying to push the service as a business-oriented operation, it now wants to promote CompuServe to consumers. AOL -- and CompuServe, when it was independent -- has tried this before and failed, but what the heck, if at first you don't succeed... AOL's motivation here is essentially to tap into the emerging Internet appliance market. Sure, eMachines' PCs aren't exactly Internet appliances in the strictest sense of the term, but neither is Apple's iMac, but over 80 per cent of iMac buyers chose the machine specifically to use it to get online, either as PC novices or experienced users. The odds are goof that that's why punters have been opting for eMachines' four hundred buck machines too, especially since, at that price, the spec. isn't much to write home about. Financial terms of the deal were not disclosed. Punters who by an eMachines computer and sign up for three years with CompuServe 2000 get $400 back in connection fee rebates, which pretty much covers the cost of the PC in the first place. AOL can easily afford to waive connection charges in this way, and it might well be just enough to persuade buyers they're getting a free PC. And if they don't stay that long, well at least AOL hasn't lost $400 revenue up front. That could even pave the way for some sort of buyout, giving AOL its own line of budget computers that it can give away completely or pay for over time using the free connection time method. That said, AOL is probably more interested in Microworkz' iToaster PC, a $199 monitor, CD-ROM and floppy drive-free computer based on the BeOS. AOL is talking to Microworkz about co-marketing deals. iToaster is far more attractive to AOL than the eMachines eTower. As a Be machine, AOL can get its software onboard without any of that irritating Microsoft stuff to confuse the buyers. Indeed with a bit of modification, the OS and the entire machine could easily be rebranded as an AOL Internet Access Machine. eMachines, having already established a brandname, unlike Microworkz, would perhaps be less willing to allow AOL to do that -- or rather, it would cost AOL more. The eMachines deal certainly doesn't imply the Microworkz talks have turned sour. AOL is operating a two-pronged strategy: test the water with eMachines and use it to push CompuServe, then really go to Internet Appliance town with Microworkz to promote AOL itself. ®

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