“Never Obsolete”: The Story of eMachines Computers

The 1990s were a whirlwind of activity for the hardware world, but users still had to pay a fortune to get a computer. For example, a family had to invest $3,000 or more if they wanted a decent system, but in late 1998 a company appeared that changed everything… at least for a while. That was eMachines, a project from South Korea that, through aggressive advertising campaigns and massive discounts, managed to fight the titans of the US market in just six months.

The price-performance ratio speaks for itself in the computer market. If we look closely at which components are the most popular (Steam statistics present a good starting point), there's no doubt that users try to squeeze every penny to the maximum. That said, the constant search for attractive deals and lower costs has given rise to some pretty strange things in the past. One of them was the expression “Never Obsolete”, used to exhaustion by the people at eMachines. Where did this company come from, and what exactly did it mean by “Never Obsolete”?

The Birth of eMachines

The history of eMachines goes back to the 1980s in South Korea, where TriGem Computer (a kind of alliance between the original TriGem and Seiko Epson) and another local name, Korea Data Systems (KDS), became the most important hardware companies in that country. In 1998, both companies decided to join forces to explore the complex international market, and in September of that year they arrived in the United States under the eMachines brand.

Taking some ideas borrowed from giants like Dell and HP, eMachines began its expansion with extremely aggressive prices, and in many cases offering systems at half price, putting great pressure on its competitors. In its original line, the most expensive configuration didn't exceed $600, though it came without a monitor. That was the part of the equation where KDS stepped in, with discounts on its monitors if they were bought along with an eMachines computer. However, the company's long-term strategy had an additional element: the Internet.

Potential owners of a new eMachines system could get additional discounts by signing up for an Internet service for $20 a month, but that wasn't all: That contract included access to the “eMachines Network”, a program that allowed users to upgrade their system to a more modern version every 24 months. At first, this upgrade was offered free of charge, but eMachines' labels on their cases indicated an extra payment of $99. That's the trick behind the famous “Never Obsolete”: a mechanism to improve the computer every two years, as long as all conditions are met.

At first, this worked very well for eMachines. In just six months it established itself as the fourth player in the US market, with 9.9 percent. A year later, eMachines became a public company, getting about $180 million in the process… but its problems had already begun. The low price of its computers left very limited profit margins (4 percent), and it also suffered in quality, with shocking return rates. As if that weren't enough, in August 1999 they launched the eOne, which essentially copied the look of the iMac Bondi Blue. Apple fired its missiles, eMachines had to reach an agreement, and pull its computer from shelves.

The rest is almost a horror movie, with the dot-com bubble as a supporting actress. eMachines ended the year 2000 with a loss of $219 million. The change of CEO and the dismissal of 16 percent of its workforce weren't enough to prevent its exit from NASDAQ in May 2001 (its shares were worth 36 cents). This is when John Hui (real name Lap Shun Hui), president of KDS and one of the original founders of eMachines, appears. Hui bought the company back (returning it to private status), and free from investor pressure, focused on restructuring and optimization.

With significant improvements in customer service and a manufacturing system inspired by Japanese automakers, eMachines managed to stabilize its position and work closely with chains like Best Buy. In December 2003, eMachines introduced its T6000 computer, the first mass-produced machine worldwide with an Athlon 64 processor. The company closed its fiscal year 2003 with $1.1 billion in earnings. Things had changed completely. What happened?

In one word: Gateway. Unlike what had happened with eMachines, Gateway was on fire in late 2003, and its computer business was a disaster, not to mention several legal problems with the US SEC. Gateway reached a curious agreement in which it bought eMachines for 50 million shares and $30 million in cash, but several eMachines executives took control of Gateway, including its CEO, Wayne Inouye.

This relationship lasted until 2007, when Acer bought the Gateway/eMachines package, and in 2013, the eMachines brand was definitively retired. Gateway still exists as a “second selection” of Acer, and generally, all that's left of eMachines computers are their cases, littering recycling centers or used in mods.