Egghead Bags Retail, Bets on the Net

Citing declining revenues and continuing losses in the retail channel, Egghead, Inc. announced today it will
shift its business focus to Internet commerce, change its name to, Inc., and close its retail store network.

The company reported a net loss of $6.6 million or 29 cents per share for
the third quarter, compared to net income of $1.5 million or 9 cents per
share for the same period last year.

While sales from continuing operations for the third quarter of fiscal 1998
were $99.1 million, down 12.4 percent from the previous year’s $113.2
million, Egghead said that Internet sales of $11.8 million marked an
increase of $9.3 million from the previous year.

Egghead’s adoption of a new Internet commerce business model will coincide
with the closure its 80 store retail network and its Sacramento, CA-based
distribution center.

“We have chosen to focus on Internet commerce,” Chairman and CEO George
Orban said in a statement. “We believe that Egghead’s strong brand name and
growing base of over one million unique e-mail addresses will be
significant assets as we focus on the Internet.”

Egghead said it will combine management and operations with Surplus Direct, noting that the two
sites are posting revenues of approximately $1.0 million per week.

Orban added that he expects Egghead’s agreement with GeoCities to be followed by investments
in other marketing agreements to grow the company’s online revenues during
the coming fiscal year.

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