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eMachines Eyeing IBM, PB NEC Market Share

Entry-level PC maker eMachines will take advantage of IBM and Packard Bell NEC abandoning the consumer retail market by introducing higher priced PCs next year. Meanwhile, it has kicked off a test program for its $399 and $599 models at Wal-Mart.

Starting in first-quarter 2000, eMachines will roll out two or three SKUs with prices higher than the company’s current $899 top-end units, but it will not go above $1,500, said Stephen Dukker, eMachines’ president. Pushing the price envelope upward on its products is a departure for eMachines, which made a name for itself by being the first company to sell PCs at $399.

“The Packard Bell and IBM situation is an opportunity for us to move to the next level, and it lets us broaden our [product] line and put pressure on Compaq and Hewlett-Packard,” Dukker said.

Charles Smulders, PC analyst with Dataquest, said eMachines will have an opportunity, but so will the remaining players in the market.

Despite the change in company strategy, Dukker said, eMachines will continue to hit new entry-level price points, though he would not say when or if it would go below $399. Staying competitive at these low price points is extremely important, he said, because almost 50% of all PC sales take place below the $600 price point.

Selling the two entry-level SKUs at Wal-Mart is part of this plan, and eMachines will add an Internet appliance device to the mass-merchant channel at a later date.

The company will target the Internet appliance to consumers uninterested in buying a PC, even at the sub-$400 price points now available.

“There is some data to indicate that once home penetration hits 60% it will not go much higher,” Dukker said. “The remaining 40% may not want a computer but will still want to access the Internet and e-mail through an appliance.” He did not say when these products would become available, but said they would only sell through non-technical distribution channels.

Another new product area for eMachines is notebook computers. The company will start shipping the eSlate 400k this month with a $999 suggested retail price. This is actually the second notebook announced by eMachines. The first was introduced last year at $2,000, but Dukker said the price point was too high so the decision was made not to release the product.

The eSlate features an AMD K6-2 400MHz processor, 12.1-inch LCD, 32MB of RAM, 24x CD-ROM, 4.3GB hard drive, 56K modem and two USB ports.

For the 1999 holiday season eMachines is shipping three new PC SKUs: the $899 eMonster, powered by an Intel Pentium III 500MHz processor and DVD-ROM drive; the $599 eTower 466id with a Celeron 466MHz processor and DVD-ROM drive; and the $399 eTower 433i, sporting a Celeron 433MHz processor and 40x CD-ROM drive.

Dukker said the company will be able to fulfill all its orders, despite the increase in demand caused by the IBM and PB NEC departures.