Media Relations

PeoplePC Reports First Quarter 2002 Financial Results

5/1/2002

SAN FRANCISCO--(BUSINESS WIRE)--May 1, 2002-- PeoplePC Inc. (NASDAQ: PEOP), today announced financial results of the first fiscal quarter, 2002.

First Quarter Results

PeoplePC reported total net revenue of $48.0 million compared to $37.3 million in the first quarter of 2002. Operating expenses decreased by 65% to $13.2 million compared to $37.7 million a year ago. This improvement reflects the aggressive cost-cutting measures the company took throughout the previous year.

The Company reported a net loss of $8.8 million, or $0.03 per basic and diluted share, compared to a net loss of $36.2 million, or $0.33 per basic and diluted share, in the first quarter of 2001. Excluding non-cash charges for the amortization of deferred stock-based compensation, the Company's net loss was $7.0 million, or $0.02 per basic and diluted share, versus $30.4 million, or $0.28 per basic and diluted share, in the first quarter of 2001. PeoplePC reported a gross profit of $4.2 million versus a gross loss of $603,000 in the same quarter last year.

As of March 31, 2002, the company had cash and restricted cash of approximately $13.7 million and $5.7 million in accounts receivable.

Total PeoplePC membership at the end of the first quarter 2002 increased to 588,000 members compared to 496,000 members at the end of the first quarter 2001.

Program agreements that were signed in the U.S. and United Kingdom during the first quarter include:

• An agreement with the Veteran's of Foreign Wars (VFW), to offer Internet access to 1.9 million veterans and its 1 million auxiliary members, as part of the VFW's Reach Out, Connect and Communicate program.
• Signed and implemented the first "Win-Win" program in the UK with Sodexho, the UK's leading catering and support services provider. Its 22,000 employees can now purchase a computer and Internet access package using pre-tax dollars.
• Signed a "Win-Win" program agreement with Countrywide Assured Group, a life assurance and financial services group in the UK. Under the program, Countrywide's 7,000 employees will be offered a computer and Internet access package, which they can pay for using pre-tax dollars.

PeoplePC also signed several other private label Internet access program agreements in the U.S., which have yet to be announced, including an agreement with a leading online ethnic community portal and an agreement with a diversified media and services company.

In other news, the Company's Board of Directors elected two new members to the board, Robin Richards and Lee Feldman. Robin Richards, 46, is the Chief Executive Officer of Vivendi Universal Net USA, where he oversees six Internet sites including MP3.com, GetMusic.com and Education.com. Before that, he served as director and President of MP3.com, Inc. Mr. Richards received a Bachelors of Science degree from Michigan State University.

Lee Feldman, 34, is a Partner at SOFTBANK Capital Partners. He has extensive experience in corporate/business development, mergers and acquisitions and corporate finance. Before joining SOFTBANK, Lee was the Vice President of Corporate Development at Ziff-Davis. He received his BA and JD from Columbia University.

The annual meeting of stockholders of PeoplePC will be held May 31, 2002 at 11 a.m. PDT, at the Hyatt Regency, 5 Embarcadero Center, San Francisco, California.

Quarterly Conference Call

PeoplePC will be holding a conference call with investors today, May 1, 2002 at 2 p.m. PDT or 5 p.m. EDT. To access the call live over the Internet:

• Go to PeoplePC's home page: www.peoplepc.com.
• Click on "About Us" at the bottom of the page
• Click on "Media and Investor Relations" on the sidebar of the page
• Click on the "Live Webcast" icon

Listeners should sign on five minutes before the broadcast starts to allow time to download the media software.

About PeoplePC

PeoplePC is the leading global provider of complete Internet access solutions, enabling its partners to reduce costs, generate revenues and deepen relationships with their constituencies. It works with ISPs, employers, membership organizations and individuals. PeoplePC's Custom Connections service is built on a high-quality dial-up network, aggregated through relationships with a dozen major telecommunications providers. The service has a number of tiers of customization: (i)billing management and customer care;(ii) branded or private label email and online experience;(iii) a suite of Customer Relationship Management tools;(iv)PC and other hardware options. PeoplePC's clients include some of the world's largest corporations such as The Ford Motor Company, Delta Air Lines, Vivendi Universal; and some of the most powerful affinity groups, including AAA and VFW.

For more information, visit http://www.peoplepc.com.

The 2002 financial information provided above is based upon preliminary, unaudited financial results.

This press release contains forward-looking statements that are subject to the assumptions, risks, and uncertainties discussed below. Actual results may vary from those projected in the forward-looking statements. If the company's assumptions about the future do not materialize or prove to be incorrect, the company's results could differ materially from those expressed or implied by such forward-looking statements. A forward-looking statement is any statement that looks to future events, including any projections of earnings, revenues, or other financial items; any statements of plans, strategies and objectives of management for future operations including the company's plan to achieve profitability, through various strategic initiatives; any statements regarding proposed new products, services, business opportunities, or developments; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing.

In addition, the above forward-looking statements depend on assumptions relating to our ability to expand our membership base and enter into new enterprise agreements, our ability to provide consumer financing for the purchase of our products and services, our ability to generate, through operating revenues or through the proceeds of equity or debt financing, sufficient cash to continue operations and implement our business plan, the willingness of third party vendors to provide products and services on acceptable terms, our ability to meet our obligations under enterprise agreements, the containment of the costs of providing products and services, the containment of customer acquisition costs, our ability to generate revenues from merchant partners, competition, international expansion, and other risks described from time to time in PeoplePC's Securities and Exchange Commission periodic reports and filings. The company assumes no obligation to update these forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made. Further information on potential factors that could affect these forward looking statements and the company's financial results are included in our 10K and 10Q filings with the Securities and Exchange Commission.

PeoplePC, PeopleShop, and their respective logos, are among the trademarks and/or service marks of PeoplePC, Inc. in the U.S. and other countries. All other trademarks belong to their respective holders.

                             PEOPLEPC INC
            Unaudited Consolidated Statement of Operations
               (In thousands, except per share amounts)

                                          Three months ended
                                  March 31,     March 31,    Dec. 31,
                                    2002          2001         2001
                                  ---------    ---------     ---------
Net Revenues:
    Membership revenues earned    $  46,268    $  34,506    $  44,968
    Other revenues                    1,736        2,827          966
                                  ---------    ---------     ---------
    Total Net Revenues               48,004       37,333       45,934

    Cost of revenues                 43,827       37,936       41,714
                                  ---------    ---------     ---------
    Gross profit / (loss)             4,177         (603)       4,220

Operating expenses:
    Sales and marketing               1,255        7,002        2,557
    General and administrative       10,123       26,781       14,912
    Amortization of
      deferred stock based
      compensation                    1,815        5,802       (2,528)
    Other operating expense              (1)      (1,873)        (194)
                                  ---------    ---------     ---------
    Total operating expenses         13,192       37,712       14,747
                                  ---------    ---------     ---------
Operating loss                       (9,015)     (38,315)     (10,527)

    Minority interest                   311        2,436          950
    Net interest and other             (136)        (309)        (412)
                                  ---------    ---------     ---------
Net loss                             (8,840)     (36,188)      (9,989)

Dividend related to
 beneficial conversion
 feature of preferred stock               0            0      (21,191)
                                  ---------    ---------     ---------
Net loss attributable to
 common stockholders              ($  8,840)   ($ 36,188)   ($ 31,180)
                                  =========    =========     =========

Basic and diluted
 net loss per share
    Net loss per share            ($   0.03)   ($   0.33)   ($   0.28)
    Shares used in computing
      basic and diluted
      net loss per share            305,434      109,551      111,698


                             PEOPLEPC INC
                      Consolidated Balance Sheet
                            (In thousands)

                                      March 31,   December 31,
                                        2002         2001
                                      --------     --------

Assets:
Cash, cash equivalents, short-term
  investments and restricted cash     $ 13,653    $ 24,678
Accounts receivable, net short term      4,157       4,254
Prepaid/Other current assets             1,055       2,065
                                      --------     --------
Total current assets                    18,865      30,997

Accounts receivable, net long-term       1,554       1,836
Residual asset                           2,070       2,070
Property and equipment, net              4,757       5,396
Other assets                               644         970
                                      --------     --------
Total assets                          $ 27,890    $ 41,269
                                      ========     ========

Liabilities, Minority Interest &
 Stockholders' Deficit:

Accounts payable                      $  5,704    $  8,741
Deferred revenue - net short term       20,720      21,082
Accruals/Other current liabilities       8,649       9,188
                                      --------     --------
Total Current liabilities               35,073      39,011

Deferred revenue - net long term        18,927      20,964
Other long term liabilities                141         141
                                      --------     --------
Total Liabilities                       54,141      60,116

Minority Interest                     $ 40,003    $ 40,313

Stockholders' deficit                  (66,254)    (59,160)
                                      --------     --------

Total liabilities, minority
 interest and
 stockholders' deficit                $ 27,890    $ 41,269
                                      ========     ========

    As of March 31, 2002 there were 551,444 shares of common stock
issued and outstanding and 549,575 shares of common stock issued,
outstanding and fully vested.