IRVINE, Calif., April 25 /PRNewswire/ -- eMachines, Inc. (Nasdaq: EEEE), today reported revenues of $136.2 million for the first quarter of 2001, compared to the $249.8 million recorded in the first quarter of 2000. Net loss for the first quarter of 2001 was $31.1 million, or $0.21 per share, compared to a loss of $11.9 million, or $0.13 per share in the year earlier period.
Excluding the previously announced charges associated with the transition to a new CEO and the restructuring of the Internet business unit, and non-cash stock-based compensation and amortization of intangible assets, the net loss was $22.1 million or $0.15 per share. This compares to net income of $737,000 or $0.01 per share in the year earlier period, excluding non-cash stock-based compensation, amortization of intangible assets, and accretion of mandatorily redeemable preferred stock.
These results reflect the substantial sales discounts and incentives given to retailers to enable liquidation of product inventories. This action was required due to the industry-wide oversupply of personal computers experienced in the fourth quarter of 2000, and the continued weakness in the retail sector and in consumer demand for PCs during the first quarter of 2001.
eMachines remains substantially debt-free, continues to focus on cost-management and improved its cash position at the end of the first quarter of 2001 to $155.5 million, including cash, restricted cash and short-term investments, from the $112.9 million reported at the end of year 2000. This improvement was achieved in part through sales of year-end inventory and collection of year-end receivables.
"We are disappointed with the costs we have incurred during this inventory reduction process, and expect it to be completed early during the second quarter. Nevertheless, we are very pleased with the financial health of our balance sheet which will enable us to progress towards our goal of achieving robust inventory turns and profitability," said Wayne R. Inouye, President and CEO of eMachines, Inc. "We have begun to restructure our business and focus on our core competency of delivering high quality personal computers at an affordable price."
PC Revenues
PC hardware revenues in the first quarter of 2001 declined to $134.4 million from $246.4 million in the year earlier period. Unit shipments during the first quarter of 2001 were 287,000 units, a 45 percent decrease from the first quarter of 2000. This result reflects general weakness in the consumer market and decreased demand for PCs, compared to a robust PC market in the first quarter of 2000 that was stimulated primarily by the launch of ISP rebates (up to $400) and strong PC demand as Y2K concerns subsided.
First quarter cost of hardware revenues exceeded net revenues from sales resulting in a negative hardware gross margin of $11.6 million, as a result of write-downs of inventory and promotional discounts provided to retailers, such as PCs with a monitor bundled at a greatly discounted price. The average gross selling price of PCs (before returns and allowances) was $508 in the first quarter of 2001, a 10.2 percent decrease from the average gross selling price (before returns and allowances) in the first quarter of 2000.
Internet Revenues
Internet-related revenues for the first quarter of 2001 decreased to $1.8 million compared to $3.4 million in the year earlier period, a 47 percent decrease that is consistent with our 45 percent decrease in PC unit shipments in the first quarter of 2001. Recurring Internet revenues have not materialized to the extent anticipated primarily due to the continued decline of the Internet advertising market.
As a result and as previously announced, eMachines has begun to implement its restructuring strategy by eliminating resources dedicated to proprietary Internet products, including eWare(TM), eKey(TM) and pop-up advertising.
Other Governance Issues
During the first quarter of 2001, eMachines appointed new members to its executive management team. Wayne R. Inouye joined eMachines as President, Chief Executive Officer and a member of the Board of Directors, and Yasuhiro Tsubota was appointed a new Board member. In addition, on April 17, 2001, eMachines' Board of Directors appointed Brian Firestone to the position of Executive Vice President, Strategy and Business Development.
Business Outlook
Although the second quarter is traditionally the weakest quarter of the year for PC sales, eMachines sees sales for the second quarter consistent with the first quarter of 2001. However, due to continued liquidation of inventories, eMachines' net loss should only show slight improvement over the first quarter of 2001 (excluding costs associated with the CEO transition and the restructuring of the Internet business unit).
During the second quarter, eMachines will test market its new direct channel effort through the limited launch of an infomercial, the results of which are expected to be neutral for the quarter. In the second half of 2001, eMachines anticipates continued sales weakness in the third quarter and a return to more seasonal levels in the fourth quarter. Sales in the third quarter should show some improvement over the prior preceding quarters of 2001, and losses should greatly narrow as eMachines implements its strategies to improve inventory turns and reduce operating expenses. eMachines is comfortable with the published earnings estimates of a loss of approximately $0.07 per share in the second half of 2001.
Q1 2001 Conference Call and Webcast eMachines will hold its first quarter 2001 conference call and live audio Webcast today at 4:30 p.m. Eastern/1:30 p.m. Pacific. Webcast details are at streetevents.com or e4me.com.
Annual Shareholders Meeting
eMachines, Inc.'s first Annual Shareholders Meeting will be held on Wednesday, June 20, 2001 at 9:00 a.m. at the Hyatt Regency hotel in Irvine, California.
About eMachines, Inc. eMachines, Inc. (Nasdaq: EEEE) is a leading provider of low-cost, high-value personal computers. Founded in September 1998, eMachines began selling its low-cost 'eTower(TM)' desktop computers in November 1998. In June 1999, eMachines sold the third highest number of PCs through retailers in the United States, according to leading market research organizations, and presently holds this number three market share position. Since inception, eMachines has shipped more than 3.7 million PCs through leading national and international retailers, catalog and online merchandisers. Approximately one of every two eMachines consumers is a first-time PC buyer, based on owner registrations with eMachines. eMachines' Web site is located at e4me.com. This press release contains forward-looking statements relating to future events and results that are based on eMachines, Inc.'s current expectations. These statements relate to the outlook and prospects for eMachines and the markets in which it operates. These statements involve risks and uncertainties including, without limitation, the level of demand for eMachines' products and services, eMachines' and its suppliers' ability to timely develop, deliver, and support new and existing products and services, eMachines' ability to manage and liquidate its inventory, reduce operating expenses and predict changes in the PC market, the cost and availability of key product components, competitive pressures relating to price reductions, new product introductions by third parties, technological innovations, eMachines' ability to successfully appeal the delisting of its stock, and overall market conditions, including demand for computers, Internet access devices and Internet services, and eMachines' ability to timely and cost-effectively restructure its Internet business unit. Consequently, actual events and results in future periods may differ materially from those currently expected. Additional information regarding the factors that may affect eMachines' future performance is included in the public reports that eMachines files with the Securities and Exchange Commission. eMachines, Inc.
Unaudited Condensed Consolidated Statement of Operations (In thousands, except share information) Quarter Ended Quarter Ended March 31, 2001 April 1, 2000 Net revenues: Hardware $134,435 $246,443 Internet 1,751 3,397 Net revenues 136,186 249,840 Cost of revenues: Hardware 146,037 234,979 Internet 588 353 Cost of revenues 146,625 235,332 |
