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eMachines Scales Back Production

IRVINE, CALIF. -Citing a worldwide slowdown in eMachines’ product sales, the company last week announced a 20 percent reduction in production and reported a third-quarter loss of $2.9 million on sales of $175 million.

Adding to the company’s dilemma, eMachines CEO Stephen Dukker said, is a general weakness in the PC market. “Although we are pleased with our performance in the third quarter, the recent sales and earnings warnings announced by our component suppliers, competitors and retail partners make it prudent for us to reduce production,” said Dukker.

Steve Koenig, an analyst at PC Data, Reston, Va., said eMachines’ problem is compounded by the aggressive pricing and advertising campaigns being implemented by Compaq and Hewlett-Packard.

“When a consumer sees HP and Compaq on the same shelf with eMachines, people will take one of those and not eMachines,” he said. “In this sense, eMachines is somewhat a victim of its own brand image of being a cheap PC. People don’t necessarily always want just a cheap computer.”

The company’s unit shipments in-creased 9 percent for the third quarter compared to the same period in 1999 but were up 25 percent compared to the second quarter of 2000. The average selling price for eMachines’ PCs rose a bit to $508, from $492 the previous year.

These increases were unable to nudge the company back onto the IDC or Dataquest top-selling PC list for the third quarter. During the first quarter, eMachines had climbed its way to fifth place on both research firms’ lists, garnering about 4 percent of the market.