Founder of eMachines doles out $72 million in employee bonuses
By Mike Freeman
UNION-TRIBUNE STAFF WRITER
April 16, 2004
Employees at eMachines received hefty bonuses after the Irvine company was acquired by Poway-based Gateway last month.
A spokesman for the low-cost computer maker confirmed yesterday that founder Lap Shun "John" Hui handed out checks to the firm's 140 employees. The checks amounted to at least 30 percent of their annual salaries.
Everyone from warehouse workers to executives received bonuses, with some top managers getting nearly $100,000.
The Orange County Register reported the story yesterday, quoting Hui and the chief executive at eMachines, Wayne Inouye, who is now chief executive of Gateway.
Gateway bought eMachines for $30 million in cash and 50 million shares of restricted stock in a deal valued at $289 million.
Based on the estimated value of Gateway shares at the time the deal closed, Hui distributed about $72.5 million to workers – or more than half the $129.5 million profit he made from the sale.
"Typically, an owner would keep everything," Inouye said. "But John felt very strongly that every employee should be rewarded and share in the transaction."
Hui, who kept about $57 million in profits, said rewarding workers is smart business. "I'm not a generous guy. I end up with the most," he told The Register.
The news about the bonuses apparently caught Gateway managers in Poway off guard. The company has been telling reporters for weeks that Inouye and other executives were unavailable for interviews, particularly leading up to the company's April 29 earnings report.
While Gateway is the acquiring company, most of the surviving top executives are from privately held eMachines. The company also has announced that it is moving its headquarters this summer from Poway to Irvine.
Of the total value of bonuses that Hui doled out, the bulk came from the 12.5 million shares of Gateway stock split among about two dozen top executives. Based on the price of Gateway shares when the deal closed, the stock was worth about $65 million.
The stock is restricted, meaning it can't be sold immediately. The restrictions, which limit stock sales to certain time periods, continue for an average of two years, a Gateway spokesman said.
The restriction was included as part of the sale agreement between Gateway and eMachines.
Still that left a significant amount for the bonuses that Hui provided to eMachines workers.
"I bumped into a lot of happy people when I handed out the checks," said Adam Andersen, former eMachines chief operating officer and now chief administrative officer at Gateway.
In 2001, Hui paid $1.06 per share, or $161 million, for then publicly traded but badly struggling eMachines.
Hui recruited Inouye from Best Buy to turn eMachines around. The company eventually was taken private. Last year, the firm had $1.1 billion in sales and said it was profitable.
The Associated Press contributed to this report.
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