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The Tragic End of eMachines: The $1 Billion PC Giant That Ruled Cheap Tech, Then Destroyed Itself

The Fatal Board

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In 1998 a bankrupt Korean factory and an American shelf-space specialist built a computer nobody believed: $399, in every big box store in the country. Within twelve months eMachines was the third largest PC seller in the United States. Eighteen months after that it was trading at seventeen cents a share.

This is the full story of how eMachines ruled cheap tech and then erased itself — the $399 eTower, the eOne that Apple sued out of existence, the $400 mail-in rebate that hid a three-year Prodigy contract worth $718.20, the Free PC giveaway it bought and buried, the free internet service it cancelled six weeks before its own IPO, and the floppy disk controller defect that was already eleven years old before the company existed.

It is also the story of the most under-told turnaround in PC history: how a Best Buy retail executive named Wayne Inouye took a delisted penny stock, pushed inventory turns from four a year to over seventy, cut overhead to 5.8% of sales, and made eMachines the number three PC brand in America and 26% of everything sold through US retail — before it was swallowed by Gateway, then Acer, then deleted from the catalogue in January 2013.
The decision that killed eMachines is the same arithmetic that sells you a phone today.

TOP SOURCES
Forbes Global, "E-savior" (founding, ownership split, TriGem and KDS) — https://www.forbes.com/global/1999/10...
Forbes, "The trouble with eMachines" (the 3% gross margin) — https://www.forbes.com/1999/09/01/mu2/
Federal Trade Commission, complaint against Office Depot, Docket C-3977 — https://www.ftc.gov/sites/default/fil...
Forbes, "The McDonald's Of Computers" (the Inouye turnaround) — https://www.forbes.com/forbes/2003/11...
Computerworld, "Gateway to acquire eMachines in $234M deal" — https://www.computerworld.com/article...

FURTHER SOURCES
Apple Newsroom, worldwide injunctions, 8 March 2000 — https://www.apple.com/newsroom/2000/0... Wikipedia, eMachines eOne — https://en.wikipedia.org/wiki/EMachin... Wikipedia, eMachines — https://en.wikipedia.org/wiki/EMachines Computerworld, "eMachines to end free Internet access" — https://www.computerworld.com/article... The Register, "eMachines snaps up, buries Free-PC" — https://www.theregister.com/1999/11/3... Tech Monitor, "The first free PC emerges at Demo 99" — https://www.techmonitor.ai/technology... Federal Register vol. 65 no. 131, Office Depot consent order — https://www.govinfo.gov/content/pkg/F... The Register, "eMachines looks for buyer" — https://www.theregister.com/2001/05/0... The Register, "eMachines loses Nasdaq listing" — https://www.theregister.com/2001/05/2...

This channel is made by an enthusiast who loves business and technology history — nothing more. All videos are for educational and entertainment purposes only and reflect my personal views and interpretations. I research each story carefully using publicly available sources, but errors or omissions can happen. Nothing here is professional, financial, or legal advice, and this channel is not affiliated with, endorsed by, or sponsored by any company mentioned.

20 Comments

@noelht1 1 month ago

I had completely forgotten about emachines, but they were everywhere

@LogicalIndian-ry1mu 1 month ago

eMachines deserves immense credit for fulfilling millions of dreams and for bringing personal computers within the reach of the lower-middle and middle classes. You’ll find countless people whose very first PC was an eMachines. For many of them, that affordable machine was the starting point of a journey that eventually led to careers in IT and technology.

@j.b.6855 1 month ago

I remember my first eMachine. I still have it in this house. A computer with a Pentium 3 in it at 1.2 GHz. It was a fantastic computer and the price was below everything and it's range. It lasted for many years before it was replaced. But by that time I was building computers out of components. For people who couldn't build a computer eMachines was fantastic. It let them get good Hardware at a good price.

@poodlescone9700 1 month ago

They used the cell phone sales model. It was ingenius.

@EricKnight-r1f 1 month ago

Brings back memories, that was a heck of a deal. You were paying the same price for dialup, but this way you got a free computer. Remember when cell phone companies always gave you a free phone with a contract.

@LordPrometheous 1 month ago

I worked at Circuit City from 2000 to 2002 and they sold those inside the store. I was an installer , so I worked in the road shop doing remote starts, stereos and amps, speakers, alarms, etc. One of my coworkers did talk about eMachines and he liked his. I was never a fan of pre-built computers and I could never bring myself to buy something on the low end because I like playing games too much. I imagined those computers to be better suited for people who only use the PC for light activities like internet access, email, maybe listening to music.

@caeserromero3013 1 month ago

As soon as I watched the bit about the 'rebate' (if you paid the monthly subscription) my very first thought was "That sounds like how mobile phone contracts work," You get the phone free or subsidised, as long as you sign up to a subscription that ends up costing more than the cost of the phone.

@123ElectricMonkey 1 month ago

My first computer purchase was an E-Machines “E monster” 1GB Processor in 1999 was FAST

@berndkemmereit8252 1 month ago

I bought one in 2003 or so, the silver model with Flatscreen it was very cheap. It did well, it played Civilization and I was happy....

@LazyFramePrime 1 month ago

Omg every one of your vids has been so nostalgia inducing. Every single one I’ve been like omg I forgot they existed

@longjohn526 1 month ago

I remember eMachines because all their stuff burned up because of defective electrolytic capacitors ..... Motherboards ..... Power supplies ...... Monitors. While this affected a lot of the industry at the time it was especially a problem with eMachines ... All because of a part that cost them maybe 10 cents apiece .... All because aTaiwan company stole an electrolyte formula from a Japanese manufacturer that was defective (and possibly defective on purpose) The "capacitor plague" would make a good subject for a video

@gerrymichaud3851 1 month ago

I remember the manufacture rebates. I never used them. For me it was to much of a hassle to deal with.

@actaeoni 1 month ago (edited)

An eMachines was my first PC purchase. I got it when I was 16 yet. I immediately reloaded the operating system to remove those stupid ad banners, closed the bank account I used to sign up for internet after I received my rebate (only had to pay 2 months of internet before my rebate showed up). It was fantastic, and shortly after I got cable internet. I do remember the floppy drive issue, though ... pretty sure I had to replace mine.

@williamharris8367 1 month ago

My Parents bought an eMachines PC in about 2001 or 2002. It worked for a few years when the power supply failed, which killed the onboard video.

The retailer replaced it under warranty with something better quality.

@christopherkahn6522 1 month ago (edited)

Although this story goes back and forth way too often, it ends brilliantly. I won't spoil it but the clue is subsidy.

@JMR-v4z 1 month ago

This is an outstanding video. I remember buying an eMachine back in the summer of 1999. They really were cheaply built. I had lots of trouble with mine. But they sold for a decent price at Circuit City. And the fact that eMachines lives on not with Acer, but with the way we obtain our beloved $1,200 plus flagship smartphones every three years. Fascinating.

@heatherford4145 1 month ago (edited)

Got one in 2002 for graduation from high school. It helped in college since I didn’t need to use a computer lab for all the papers I had to write.

The library sold floppy disks to save your papers on for $3…I feel ancient

I also had to replace the motherboard but I’m pretty sure that one was on me.

@gino0612 1 month ago

My first desktop computer was an emachine. I want to say I purchased it around 2004 once my Dell Laptop stopped working.
Never an issue and we had many years.

@lobecosc 1 month ago

I remember working on these computers. I might have had one. Good times.

@haweater1555 1 month ago (edited)

Also the ubiquitous 1990s names of Compaq, Packard Bell and Gateway 2000, because people stopped buying full-sized "home PC" systems and just used net-connected notebooks, tablets, and phones. And those portable devices used specialized production procedures that were expensive to develop, rather than fast assembly of commodity components in big grey boxes.