Pasadena, California-based Free-PC Inc, whose innovative business model saw it give away 30,000 PCs since launching earlier this year, has given up trying to go it alone and will merge with Irvine, California-based eMachines Inc. Free-PC tried to balance its books by targeting highly personalized ads to the subscribers to its free PC and ISP. eMachines, which charges only a few hundred dollars for its hardware, says it wants to explore whether the Free-PC model can contribute to its own bottom line. Both companies are privately held, and under terms of the deal, shareholders in Free-PC will exchange their stock for shares in eMachines. Bill Gross, chair of Free-PC and the founder of idealab!, will take a seat on the eMachines board. President and CEO of eMachines Stephen Dukker will remain in his present position while CEO of Free-PC Donald La Vigne will become an executive vice-president of eMachines. No other details of the merger were disclosed.
Dukker explains that eMachine’s goal has always been to capitalize on internet revenue opportunities, since most of its customers are purchasing its low-cost PCs in order to access the net. Our existing strategic and equity relationship with AOL on the ISP front was a first step in that direction, he said. When you merge our distribution base of retail PC sales with Free-PC’s internet e-commerce partnerships, you get a killer combination. Analysts were less sanguine about the merger. The combined company will no longer try to expand the base of Free-PC and FreePCNet customers. Instead, it will seek to leverage the Free- PC technology and sales capabilities to add revenue opportunities to the eMachines business. If that sounds less like a merger than an outright acquisition to you, you’re not alone. eMachines admitted that the deal will delay its planned IPO for several months, but the company still hopes to make its stock market debut in the first quarter 2000.
