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.
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.
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
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.)
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.
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.