February 3, 2000 12:25 PM PST
Emachines deal signals end of free PC era
The news ends a wild ride for Free-PC, and, at the same time, results in a nice early February present for thousands of Free-PC customers. Free-PC, which recently merged with Emachines, has announced that customers who signed up for the deal and received a PC get to keep it, no strings attached, although the free Net service will end.
That means customers like Craig Belldina of Maryland get to keep their Compaq computers and will no longer be bombarded with the ads Free-PC has been sending to their desktops.
The ads were the key part of the plan. Free-PC first gave away the computers and Net access to customers willing to accept on-screen advertising in February 1999. The problem for Free-PC was that Belldina and others weren't watching enough ads to turn Free-PC into a self-sufficient business.
"Once I got used to (the ads), I finally ignored them altogether," Belldina said, noting that the ads didn't seem to change often.
Another customer, Joe Williamson of South Carolina, said the ads were "sometimes useful as a starting point for finding goods and services," but that poor customer service and support was the Achilles' heel of the program.
Free-PC and Emachines have been at the forefront of the price war that has revolutionized the consumer PC market. Combined with rebates, some Emachines systems sell for $1 or less.
Although Emachines was relatively unknown 18 months ago, its aggressive pricing model has since landed it a spot among the top consumer PC makers in the United States. And earlier this year, America Online placed an investment with the company.
Free-PC, meanwhile, tantalized customers
Several start-ups with similar business models followed last year. But like Free-PC, many of them are gone now.
Free-PC gave away approximately 25,000 computers during its short existence, according to company figures. It was purchased in November by low-cost computer maker Emachines, which itself offers nearly free computers when certain conditions are met.
Emachines recently indicated it would write off the assets of Free-PC. The PC maker spent about $21 million on its promotions in 1999.
As a part of the discontinuation of the Free-PC business, users will lose free Net access and will have to refer technical support calls to either Compaq Computer or Dell Computer, according to the email.
Yet the trend has left a lasting impression, analysts said.
"The most important part of the legacy of the nearly free PC movement was the conversion of individual's business from a transaction to a relationship," said Roger Kay, analyst with International Data Corp.
Customers used to buy a PC and never deal with the company again. Now companies are trying to make sure they get more of the ongoing revenue streams from Internet service fees and, someday, a cut of transactions conducted on the Web, Kay said.
There is evidence that Free-PC's legacy will linger. Emachines will use the company's software to help bolster profit margins on low-cost systems by making ads available on a system's screen.