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Emachines sells itself to founder

Private Hands

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Budget PC maker eMachines has agreed to a $161 million buyout offer from EM Holdings. At the centre of the deal is Lap Shun "John" Hui, a founder and director of eMachines, and sole owner of EM Holdings.

At $1.06 per share, the offer is 36 per cent higher than an earlier proposal tabled by Hui. The deal as constructed by EM Holdings will see a seamless transfer on current retail distribution, technical support and existing warranties. Existing management, including president and chief executive Wayne Inouye, will be retained.

eMachines last year awarded exclusive European representation rights to Dixons Stores Group, and solus retail rights in countries where the electronics retail giant operated.

The company has never been profitable - as of September 29, it had racked up losses of $301.1 million - but executives recently told analysts that it hopes to break even or report a small profit at the end of the year.

In May it was delisted from the Nasdaq, as its share fell below the one dollar level. This came shortly after the company pegged a 'for sale' sign on itself and shed 16 per cent of its staff.

eMachines is Korean-owned but based in America. It sells PCs as cheap as they come, building huge market share in 1999 through deals with MSN and others which saw customers receive PCs as part of bundled ISP contracts. Since the end of those deals sales have fallen by half.

In October 2000, the company announced plans to cut PC manufacture by 20 per cent, in advance of the Christmas season. In retrospect that was probably the wisest call on the market of any US PC maker - even though it was prompted more by financial exigencies than by an ability to read a crystal ball. It sold 311,000 units in Q4 2000, down 49 percent from the fourth quarter of 1999.

In an October IDG.net user survey tracking reliability and service, EMachines was rated 'poor' for its service on home PCs.

The deal is contingent on shareholder approval. ®

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