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To: Jan Crawley who wrote (65798)	7/1/1999 12:35:00 AM
From: GST	Read Replies (1) \| Respond to of 164684

Jan -- This is going to be the beginning of something very big: Wednesday June 30, 9:51 pm Eastern Time America Online enters "Free PC" deal By Dick Satran SAN FRANCISCO, June 30 (Reuters) - America Online Inc (NYSE:AOL - news) on Wednesday unveiled a marketing alliance with Korean-backed E-Machines that will offer personal computers virtually for free to those who sign up for three years of online service. The deal, which includes a minority investment by AOL in E-Machines Inc, reflects a growing trend by personal computer makers to join Internet providers in offering bundled services at low prices. The companies will launch within a week a special promotion to sell computers with a $400 rebate to buyers who sign on to AOL's Compuserve 2000 for three years. One of the computers being offered is a $399 basic E-Machine model, meaning consumers get the computer for the cost of the online service, about $20 a month. ''The computer is beginning to follow the cell phone model -- where you get the product free for signing up for a monthly service,'' said Stephen Dukker, chief executive office or e-Machines. Dukker predicted that the deal would dramatically boost the number of computer users connected to the Internet, especially among lower income consumers who have been shut out of the market. Market surveys show that roughly half the homes in America have personal computers. ''This is going to change the world. It's going to have a profound effect on the way computers are sold,'' Dukker predicted. ''And it's going to bring an era of universal computing in which everyone is connected to the Internet.'' America Online is expected to join similar marketing deals with other PC makers, and was reported to be in talks with Seattle-based Microworkz, maker of a $199 computer. Dukker said ''this is not an exclusive arrangement -- we expect AOL to do other deals with other PC makers.'' AOL is feeling the growing pressure from high-speed Internet service providers, including ExciteAtHome Corp., which says that it expect to gain 25 percent of home Internet connections within three years, and claims half its new subscribers come from AOL. By locking consumers into longer-term deals for its basic service, AOL can consolidate its lead as the No. 1 Internet access provider. Dukker said that the service contract offers are often shunned by buyers of higher-priced computers, but are readily accepted by entry-level buyers. ''This kind of (rebate) offer works best with very low-priced PCs.'' Computer makers themselves are feeling pressure to offer Internet services bcause of price pressures in their core market, and the Internet has become the key driver of sales. Internet service offers PC makers a chance to generate a new source of revenue at a time when their profit margins are disappearing due to low PC prices. Dell Computer Corp. (Nasdaq:DELL - news) and Gateway Inc. (NYSE:GTW - news) are among those said to be considering either offering their own Internet services, or buying an existing Internet service provider. AOL said under its new deal with E-Machines, both America Online and AOL's CompuServe 2000 software will be integrated into eMachines' PC. E-Machines has said it expects to reach $1 billion in sales this year, and has become one of the top five PC makers in less than a year. Dukker would not disclose how the company would ramp up production to meet anticipated strong demand from the AOL marketing pact, or how long the offer would be extended. E-Machines' models include the $399 eTower, and it also has models selling for up to $599, without monitors. The company is owned by South Korea's TrGem Computer Inc. and Korea Data Systems. Dukker earlier this year said the company plans an initial public offering of stock in the United States at some point this year. He would not disclose the size of America Online's investment.