Our last pick TELIE has turned out to be a disappointment, having been delisted from the OTC Bulletin Board since our profile report. It now appears that the convertible debenture situation is worse than we anticipated… unfortunately, these stocks are highly speculative.

On another note, readers were alerted to a developing situation with Star Telecom (STRXQ)… the stock price has since climbed 110%. Since our last report, we have become even more optimistic in our assessment of the possibilities for Star Telecom. The Chp.11 hearing is scheduled for May 13… it is our opinion, that given the weight of what is available in the public domain, STRXQ is likely to be successful in the court proceedings. That being the case… we could be looking at a very nice potential upside return in the next couple of weeks for those willing to put capital at risk…

Lastly, before we get to this week’s pick, it is with mixed feelings that I point to the potential of an earlier Stockprowler.com pick, Majestic Industries, Ltd. (MJXC) http://biz.yahoo.com/prnews/010330/laf029.html. I say that because the stock is finally getting the attention it deserves, but at the expense of the lives of 4 children from Oak Hill Middle School in Newton, Massachusetts. The children lost their lives in a school bus rollover accident last week on a school field trip. Stockprowler.com urges everyone to call or write their elected representatives and urge them to place the lives of our nation’s school children at the top of their agenda… the Oak Hill tragedy didn’t have to happen.

Stockprowler’s pick this week…
eMachines, Inc. (NasdaqNM: EEEE)
Corporate Web Site: http://www.e4me.com/
Shares Outstanding: 145.5 million
Public Float: 37.8 million
Insider Ownership: 74% (America Online, Inc. owns 6%)
Institutional Ownership: (40) - 7% (28% of float)
Analyst Opinions: (2) Hold
Market Capitalization: $34.9 million
Closing Price Friday 5/04/01: 24 cents

Irvine, California based eMachines, Inc. is a leading provider of low-cost, high quality, personal computers and of Internet advertising, portal and software distribution services. eMachines is the third largest seller of PCs through retailers in the United States. Since 1998, the company has sold more than 3.7 million PCs through leading national and international retailers, catalog and online merchandisers. Approximately one of every two eMachines consumers who have registered their PCs with eMachines is a first-time PC owner, providing the company's advertising partners with a unique opportunity to introduce themselves to new online consumers before many of them have developed strong Internet brand loyalties.

eMachines’ PCs have retail prices ranging from $399 to $1,099. The company outsources the design and manufacturing of its PCs and monitors as well as customer service and technical support, warehouse staffing, inspection, repair and repackaging of returned PCs, and administration of our rebate program to third parties. The company’s hardware outsourcing strategy enables it to minimize capital investment and maintain a low product cost structure. TriGem Computer Corp. and Korea Data Systems Co., Ltd., each 20% shareholders in eMachines, Inc., are the company’s principal manufacturers of its PCs and PC related accessories.

On February 15, 2001 eMachines, Inc. reported revenues of $134.8 million for the fourth quarter ended December 30, 2000, compared to the $307.1 million recorded in the fourth quarter of 1999. Net loss from operations for the fourth quarter of 2000 (before non-cash stock-based compensation, amortization of intangible assets and a charge for the impairment of intangible assets totaling $97.8 million, or $0.68 per share) was $31.2 million, or a loss of $0.21 per share, compared to a profit of $2.2 million, or $0.02 per share in the year-earlier period.

Revenue for the year ended December 30, 2000, totaled $684.1 million, compared to $814.3 million for the prior year. Net loss from operations for the year 2000 (before accretion of redeemable preferred stock, non-cash stock-based compensation, amortization of intangible assets and a charge for the impairment of intangible assets totaling $137.5 million, or $1.05 per share) was $83.9 million, or a loss of $0.64 per share, compared to a net loss of $4.4 million, or $0.06 per share in 1999. The company attributed the disappointing numbers to the continued slowing of the US economy which has resulted in a significant, higher than expected decrease in consumer demand for personal computers and other retail goods during the fourth quarter of 2000, a traditionally robust holiday sales period, and write-downs of product inventories to facilitate sales of PCs through the retail channel.

The company anticipates that the general economic uncertainties and a downturn in the PC market and the general retail sector will continue through the first half of 2001. eMachines is comfortable with the published estimates for the company's performance over the next two quarters.

In March 2001, eMachines announced a major initiative for streamlining operations in order to focus on its primary business of selling high-quality, low-priced PCs. As part of this restructuring plan, the company will reduce its exposure to the declining Internet advertising market by eliminating resources dedicated to its Internet products and focusing on more profitable ISP products. The company expects to take a restructuring charge of approximately $3.7 million in the first quarter of 2001. Included in the charge will be costs associated with staff reductions in our Internet business unit covering approximately 16% of our total workforce, and the closure of our sales and development facilities in San Francisco and Scotts Valley, California and New York City. These actions are expected to result in a net savings of approximately $2.8 million for 2001, after taking into account an associated reduction in revenue of approximately $1.6 million.

eMachines is optimistic regarding its activities upcoming in the second quarter of 2001. In the second quarter of 2001, with the elimination of the $400 rebate offered by MSN, eMachines will gain a competitive advantage associated with its ability to continue to offer $400 rebates with its partner AOL/Compuserve through the end of the second quarter of 2001. Further, the company anticipates the industry wide elimination of all $400 rebates beginning in the third quarter of 2001. This will result in a competitive advantage which should re-establish eMachines' position as the principle supplier of naturally low-priced PCs in the $399 to $599 price bands.

The company has received industry accolades for its high-quality, low-priced eTower™ PCs… eMachines recently won the Most Valuable Product award in the “best low-cost desktop PC” category from Ziff Davis' Smart Business for the New Economy. In addition, eMachines new MSN Companion was ranked #1 in a recent ZDNet roundup review of Internet Appliances… http://www.zdnet.com/products/stories/reviews/0,4161,2699688,00.html

EMachines recently announced the introduction of the eMonster 1000Biz, a breakthrough small business computer that delivers the reliability of Microsoft® Windows®2000, and the power of a 1GHz Intel® Pentium® III processor in a PC configuration priced at a very affordable $799. A company spokesperson stated, “The eMonster 1000Biz is the most powerful business PC we have ever offered, and is priced to be affordable by even the smallest member of the rapidly expanding small business market. The amount of power at this low price makes buying the eMonster 1000Biz a wise financial decision for a small business owner to make.”

On March 21, 2001, Nasdaq advised eMachines, Inc. that it had decided to de-list its common stock from The Nasdaq National Market because of the company’s failure to comply with Nasdaq's $1 minimum bid price requirement. The company has requested an appeal of the de-listing decision before a Nasdaq listing qualifications panel. eMachines, Inc. has stated in its 10K dated March 30, 2001, “We expect that our common stock will continue to be listed on The Nasdaq National Market pending the outcome of the appeal.” The hearing date for the appeal is May 10, 2001.

Analysts are seeing signs of an early recovery in the PC sector. Stockprowler.com is cautiously optimistic that eMachines is poised to capture a large share of this re-emerging market with its newly announced strategy for targeting the small and medium-sized business market with network-ready, Windows®2000 Professional-based PCs. Also, it has been reported that the company has begun experiencing strong growth and development of market share in its newly launched joint venture with Dixons Group in the UK, a prominent European retailer.

With a $113 million in cash, substantially little long term debt, and a book value of $1.64, Stockprowler.com views eMachines, Inc. (EEEE) trading at 24 cents at the close Friday as very oversold despite the current market conditions. Given the recent cost reduction strategies and a refocusing of its business with respect toward the present challenging market conditions and global economic outlook, eMachines, in our opinion, is a terrific turnaround opportunity for investors. Readers are encouraged to visit the eMachine, Inc. web site… http://www.e4me.com/

Stockprowler.com does not receive compensation from companies profiled or from third parties associated with the companies profiled. Readers are urged to read the company SEC filings and do their own due diligence before investing in this or any other stock.

Good trading… Stockprowler