Prospectus Summary
This summary highlights information described more fully elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider before investing in our common stock. You should read the entire prospectus, including the Financial Statements and related Notes, before making an investment decision.
eMachines, Inc.
We are a leading provider of low-price, high-quality branded personal computers, or PCs. Since our first sale in November 1998 when we introduced our eTower PCs, we have sold over one million PCs. According to Ziff Davis Market Intelligence, we sold the third highest number of PCs through retailers in the United States in June 1999. We also offer an integrated computing and Internet access solution, currently through our relationship with America Online, Inc., and plan to launch e-machines.net, our private label Internet access service, in the fourth quarter of 1999.
The explosive growth in the popularity of the Internet has increased demand for PCs as the PC has proven to be the predominant means of accessing the Internet. We believe the combination of this growing demand for Internet access and the introduction of the sub-$600 PC creates an opportunity for our low- price, high-quality integrated computing and Internet access solution. As part of our integrated solution, our PC buyers may receive rebates in connection with long-term Internet access service subscriptions, or ISP rebates. We currently offer our ISP rebates through our relationship with America Online and, in the future, we plan to directly offer ISP rebates with our planned e- machines.net service. Our ISP rebates enable consumers to purchase our PCs for a net effective price of as low as $0 and to gain access to the Internet for a monthly fee. In addition, our PC buyers who do not enter into a long-term contract but subscribe to e-machines.net on a month-to-month basis may qualify for our planned program that will enable subscribers to upgrade the configuration of their eTower model PC for a low fee. We believe that our products, services and programs will appeal to a wide variety of consumers, especially first-time PC buyers, who are looking for an inexpensive and powerful means of accessing the Internet.
Our operating model allows us to cost-effectively offer our PCs and integrated computing and Internet access solution for the following reasons:
. we are able to maintain low fixed costs, capital expenditures and manufacturing and operating costs by outsourcing most of our major operating and manufacturing functions;
. we maintain low distribution, marketing and administration costs by distributing and advertising our products and services through a limited number of large retailers, including Best Buy, Circuit City, Office Depot and Staples; and . we achieve high inventory turnover through product management and outsourcing of manufacturing.
We were incorporated in Delaware in September 1998. Our principal executive offices are located at 14350 Myford Road, Suite 100, Irvine, California 92606 and our telephone number is (714) 481-2828. Our web site is located at "www.e4me.com." Information contained on our web site does not constitute a part of this prospectus.
E-MACHINES(R) is our registered United States trademark. eMachines(TM), eTower(TM), eView(TM) and eOne(TM) are also our trademarks. This prospectus contains other trademarks and trade names of other companies.
The Offering
Common stock offered.................... shares Common stock to be outstanding after this offering.......................... shares Use of proceeds......................... General corporate purposes, including working capital and financing our ISP rebate program with respect to our planned e-machines.net service Proposed Nasdaq National Market symbol................................. EEEE Summary Financial Information (in thousands, except share data) Period From Sept. 18, 1998 Six Months (inception) to Ended Dec. 31, 1998 June 30, 1999
Statements of Operations Data: Net revenues.................................... $ 58,283 $ 351,313 Cost of revenues................................ 58,088 338,790 Gross profit.................................... 195 12,523 Income (loss) from operations................... (1,913) 1,051 Net loss ....................................... (2,802) (3,909) Basic and diluted net loss per share............ $ (0.04) $ (0.05) Shares used in computing basic and diluted net loss per share................................. 77,600,000 77,600,000
June 30, 1999 Pro Forma Actual Pro Forma As Adjusted
Balance Sheet Data: Cash ......................................... $ 10,911 $157,571 $ Working capital............................... (6,502) 140,158 Total assets.................................. 160,313 306,973 Long-term obligations......................... 560 560 Redeemable convertible preferred stock........ -- -- -- Total stockholders' equity (deficiency)....... (5,120) 141,540
The total number of outstanding shares of our common stock and the pro forma data above are based on:
. 77,600,000 shares of our common stock outstanding as of June 30, 1999;
. the sale of 24,279,369 shares of our preferred stock in August 1999 (including 5,560,776 not outstanding as of the date of this prospectus that are issuable to America Online upon regulatory approval) and the automatic conversion of these shares of preferred stock upon completion of this offering into 24,279,369 additional shares of common stock; and . the issuance of 419,538 additional shares of our common stock on August 18, 1999, as consideration for the assignment of our trademark.
See Note 1 of Notes to Financial Statements for an explanation of the determination of the number of shares used in computing per share data.
The pro forma as adjusted data above has been adjusted to reflect the sale of shares of common stock in this offering at an assumed initial public offering price of $ per share (less underwriting discounts and commissions and estimated offering expenses).
The above information excludes:
. 609,200 shares of common stock issuable upon exercise of options outstanding as of June 30, 1999, having a weighted average exercise price of $1.56 per share, and 2,590,800 additional shares authorized to be issued under our stock plan;
. 227,897 shares of common stock issuable upon exercise of an option granted to our President and Chief Executive Officer, with an exercise price of $1.61 per share; and . shares of common stock issuable to America Online upon exercise of its warrants. See "Related Party Transactions--Relationship with America Online, Inc." for a discussion of the America Online warrants.
Unless otherwise specifically stated, information throughout this prospectus:
. reflects the conversion of all outstanding shares of preferred stock, including the 5,560,776 shares of preferred stock not outstanding as of the date of this prospectus that are issuable to America Online upon regulatory approval, into 24,279,369 shares of common stock automatically upon the closing of this offering;
. assumes no exercise of the underwriters' over-allotment option; and . reflects the eight-for-one stock split of our common stock effected on August 13, 1999 (all share and per share amounts of our common stock have been retroactively restated to reflect the stock split).