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EMachines' IPO Raises $180 Million


Bargain computer maker EMachines Inc. raised $180 million Thursday in pricing its first public sale of stock, which starts trading today amid continued debate over whether the company can translate its eye-popping sales into profits.

The Irvine company's initial offering was priced Thursday at $9 a share, the midpoint of the expected range.

Some analysts said the price reflected a lack of demand and investors' concern with $84.5 million in losses EMachines recorded last year.

"The prospects for this are not going to be that strong," said David Menlow, president of, which tracks initial public offerings.

But other market watchers predicted that EMachines' dizzying emergence as the industry's fourth-largest personal computer company in less than two years would erase doubts about its business strategy.

"I realize they're operating at a loss, but they've managed to come out of nowhere and build a pretty significant brand," said Ben Holmes, founder of, another firm that monitors new issues. "The stock's not going to double or triple, but anyone who can generate that level of sales is showing there's room for them."

EMachines executives, in the so-called quiet period that precedes an IPO, did not comment on the pricing. The company sold 20 million shares.

Founded in late 1998, EMachines made a splash by introducing the first branded personal computers priced at less than $400.

Its approach generated instant volume and sent a ripple through the industry, forcing other computer makers' prices downward. To date, EMachines has sold more than 2 million PCs, supplying many of the low-cost models packaged with Internet service offers by providers like America Online. Its sales topped $815 million last year.

But EMachines' profit margins are about 4%, far slimmer than competitors such as Compaq Computer Corp. and Dell Computer Corp.

"There's more pressure now on PC pricing. It's increasingly competitive," said Anne Bui, an analyst at International Data Corp. "They've got to invest beyond the box, but to be anything more than a box provider requires major investment, and they already have huge losses."

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