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Struggling EMachines to Pay New CEO $3 Million This Year

Technology: Compensation package reflects the demand for experienced executives.


These are tough times at EMachines Inc., unless you're at the top.

The struggling Irvine computer vendor lost $129 million in the last quarter as revenue slumped 56%. Its stock has not traded above $1 for months, and the company has been warned that it could be removed from the Nasdaq stock market.

Nonetheless, the company agreed to pay its new chief executive a compensation package worth nearly $3 million this year and will shell out $1.6 million in severance to its departed leader over the next several months, according to documents filed recently with the Securities and Exchange Commission.

Wayne R. Inouye, 48, who became EMachines' president and chief executive March 5, will receive a $2.36-million signing bonus within a month, in addition to an annual salary of $480,000. He also will receive options for 4 million shares of stock.

After two years, he is entitled to a $1-million bonus, at which time Inouye has agreed to step aside and serve as a special advisor to the company.

His predecessor, Stephen A. Dukker, who left after unspecified disputes with the company, will continue to receive his salary through mid-September, in addition to the severance.

EMachines refused to comment, and Dukker, one of the company's founders, could not be reached for comment. But Inouye's compensation package reflects a heavy demand for experienced executives, particularly at companies that are struggling to survive, compensation experts said.

Before joining EMachines, Inouye had been senior vice president of computer merchandising for Best Buy Co. since 1995.

Executives sometimes receive premium compensation for signing on with struggling companies because of the perceived risk they are taking, said Elliot Gordon, managing director of executive recruiting firm Korn/Ferry International's Newport Beach office.

In the case of EMachines, the risks are high. The company was founded in 1998, supplying low-cost home computers. By June 1999, it had become the third-largest seller of desktop PCs to the U.S. retail stores. But its sales margin was minuscule, leaving the company ill-equipped to weather the current slowdown.

EMachines shares closed unchanged Tuesday at 31 cents. If the stock doesn't surge beyond $1 by March 20, the company faces removal from Nasdaq.

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