EMachines’ $62-Million Loss No Surprise

Soft retail sales stunted bargain computer maker EMachines Inc.’s revenue and widened its losses in its latest quarter, company executives said Wednesday.

The Irvine firm, which is the nation’s third-largest vendor of desktop computers, lost $62.5 million in the company’s fiscal second quarter, which ended July 1. It lost $3 million for the same period last year.

The results reflected massive discounts handed out to move excess inventory and several one-time charges, Chief Executive Stephen Dukker said. Minus the charges, the company’s 33-cent loss per share was a penny more than analysts had predicted. Had it been a public company last year, its quarterly per-share loss would have been 5 cents.

Quarterly revenue dropped 42% to $124.5 million.

The second-quarter results were not a surprise, analysts said.

Dukker warned in May that consumer demand had dried up, particularly for the inexpensive models that are EMachines’ mainstay. Even after giving rebates that reduced the average gross price of EMachines computers from $566 to $501, the company shipped 37% fewer units in the year’s second quarter than in the first.

The company has taken steps to react more efficiently to market shifts, but expects the sales slump to continue into the third quarter, Dukker said.

Investors continue to give EMachines the cold shoulder. Since the company went public in March at $10 a share, its stock has fallen 71%. The stock gained 16 cents Monday to close at $2.91 a share.

EMachines’ hopes for profitability rest largely on moving beyond low-margin personal computer sales, analysts said.

Using technology gained through its acquisition of Free-PC Inc., EMachines sells space on its keyboards that link users to sponsoring Web sites with a single stroke, a form of Internet access that may prove popular with novice shoppers baffled by the online world’s complications.

EMachines also recently inked a deal with Microsoft Corp. to create a low-cost device for consumers who want Internet access without a PC’s complications. The device will hit stores later this year and may be packaged at low or no cost to buyers who sign up for one to three years of Internet service, Dukker said.