Clearly Gateway is going to be a very different company from now on. What I find most interesting is that most of Gateway's top management has been replaced by eMachines' executives. However eMachines has a rocky past as well.
I remember when eMachines went public in early 2000 (NASDAQ ticker EEEE). It had a great IPO that topped at about $9-10/share, but it also dropped rather quickly. I watched it because it was a local company (Irvine) and because I had purchased a cheap eM PC for my assistant to use. Their business model was based on advertising revenue they expected to receive from AOL and others. Therefore they sold their PCs at a loss hoping that advertising revs would make up for the difference. They also bought a company called FreePC which gave people a free PC if they were willing to view numerous advertisements.
Needless to say, the FreePC acquisition was a complete disaster and the projected advertising revenue (for both FreePC and eMachines) didn't materialize. They suffered major losses and the stock dropped as low as sub $0.20. As the company changed its business plan and restructured, things looked much better and the stock rose to over $1 (if memory serves). It was at that time it was taken private and all shareholders were bought out at around $1/share.
Many shareholders who had bought at higher levels and were holding long were enraged that the company was taken private just as it was becoming profitable. There were threats of class action suits but I don't know if any progressed.
Apparently, with new leadership, eMachines became profitable as a private company. It's too bad that they didn't allow their shareholders to participate in the profit.
I will watch with interest the Gateway transition led by eMachines execs who turned eMachines around (but also took it private).
AI
