First Boston to Lead-Manage eMachines IPO

Salomon Smith Barney and Hambrecht & Quist are expected to co-manage the offering, which is slated for late August.
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Credit Suisse First Boston

has edged out rivals to lead the public offering of

eMachines

, expected to be one of the hottest IPOs of the summer.

In just 10 months, eMachines has come out of nowhere to become the major player in the retail PC market. Thanks to the popularity of its $399 PCs, eMachines is in the same league as such powerful brands as

Compaq

(CPQ)

,

Hewlett-Packard

(HWP)

and

IBM

(IBM) - Get Report

.

Apart from Credit Suisse First Boston,

Salomon Smith Barney

and

Hambrecht & Quist

will be the two co-managers, according to two people familiar with the situation. The offering is expected to occur by the end of August.

The eMachines underwriting has been considered a prize catch for the Wall Street community ever since its CEO, Stephen Dukker, began showing up at technology conferences this spring. "eMachines is the epitome of the virtual PC retailer," says one underwriting banker, who spoke on the condition of anonymity. "The company has the right model to be successful over the long term."

An eMachines spokeswoman said she couldn't comment on the banking issue. The Irvine, Calif., company, which sells computers via retail channels and over the Internet, is jointly owned by two Korean companies,

TriGem Computer

and

Korea Data Systems

. Details on the offering price and number of shares have not been determined.

eMachines has sold almost 1 million PCs since it began shipping boxes in November, and it is now the No. 4 PC retailer in the U.S., according to the latest monthly results from

PC Data

. CEO Dukker has said that eMachines, thanks to its efficient manufacturing model, turned its first operating profit this past March.

"eMachines exit the plant with a lean overhead," says Stephen Baker, a senior analyst at PC Data. "We are even hearing the company has lower return rates than other" original equipment manufacturers. Baker says that's because at $399, customers are going to be a lot more tolerant than if they had paid $1,500 on a box.

eMachines' products, which include its etower line of PCs and eview monitors, are sold at

Best Buy

(BBY) - Get Report

,

Circuit City

(CC) - Get Report

,

Fry's Electronics

and

Staples

(SPLS)

, among other retailers.

The company hasn't filed any documents with the

Securities and Exchange Commission

, but observers expect it to raise some private money before the IPO, says George Moriarty, editor of New York-based

Private Equity Week

, a private banking newsletter. "These foreign-owned companies usually raise a lot of money just before they even file, especially if they haven't gone through any venture capital stages already."