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eMachines to Buy FreePC

Written By: R. Krause
Published On: December 1 1999

Event Summary

11/29/99 - Low-cost PC maker eMachines announced it will acquire FreePC Inc., the company that last February helped touch off the 'free PC' craze by giving away personal computers to users willing to share private marketing data.

Instead of giving away its PCs, eMachines will launch a new service, based on FreePC software, aimed at connecting first-time computer buyers with services vendors. eMachines will attempt to build that relationship via an Internet portal site created by installing FreePC's client and server-side software on an eMachines PC, which helps give new users a gateway to the Internet.

Market Impact

The primary hardware market impact is that there will no longer be free PC's available from FreePC. The greater impact will be in the refocus of eMachines from a primarily-hardware vendor to a hardware and services vendor, with a dash of portal thrown in. eMachines hopes to increase their E-commerce revenues through this model.

We see this as a consumer-focused (vs. business-focused) product set. Large corporate users will have no real need for the set of services we expect to be offered through the FreePC software. Medium-size corporate customers may have more need of the services available, but we believe the message is not compelling enough for them to change strategy. (This does not preclude those corporate users who were already considering eMachines seriously.)

eMachines' management believes this will change the PC marketplace from "a sequence of one shot sales ... to a relationship with the customer". We question whether this is really a new idea - brand loyalty, though perhaps less of an issue for PCs (vs. old-line/"bricks-and-mortar" products and companies), is still a factor. By its very nature, brand loyalty implies a "relationship with the customer", though in a different manner from what Stephen Dukker (eMachines' CEO) appears to mean. We do agree that eMachines' revenue stream mix will change, though.

User Recommendations

Corporate customers will find little of interest here. Non-corporate customers, especially first-time buyers or novices, may find the available services useful. Until the full range of services is announced, customers should adopt a "wait and see" attitude. Customers who prefer to select their own services/vendors, without having their computer supplier "suggest" a vendor, will probably want to consider other alternatives.

 
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