Dell offers details on Alienware acquisition

Dell Inc. said it has bought PC maker Alienware to expand its presence in the high-end and gaming market. Terms of the deal were not disclosed.

Round Rock, Tex.-based Dell launched its own line of luxury equipment last year, branded XPS, and introduced a “factory-overclocked” Renegade PC with gamers in mind at the Consumer Electronics Show in January.

Alienware began its life as a high-end PC maker and subsequently expanded its appeal to include vertical markets like government and education, but is still known as a company that produces gaming machines.

Dell spokesman Jess Blackburn said he doesn’t see a market conflict between Dell and Alienware, even though they may have competed in the past.

“There is some distinction between those who are attracted to the Alienware brand . . . and those who come to Dell and buying the XPS products. We really think the two product lines complement each other and really reach a wider range of customers. That’s the motivation for doing the deal.”

“They rarely do acquisitions,” said Mark Vena, Alienware’s vice-president of marketing. “It’s very flattering that something like this would even happen.”

Alienware will exist as a Dell subsidiary, but there are no immediate plans to integrate the two companies, said Blackburn. Alienware will continue as a standalone brand and there will no changes to its staff or offices. The company maintains a head office in Miami and another in Washington D.C. CEO Nelson Gonzales will continue to lead the company, but now reports to Dell CFO Jim Schneider.

Both Dell and Alienware sell direct to consumers, but there are no plans for cross-marketing or cross-selling. The only exception might be for Alienware to sell Dell monitors or other perhipheral, said Blackburn. “That’s really the extent of any co-mingling of the two brands. They would essentially be reselling Dell product.”

Where Alienware will benefit is through its access to Dell’s talent pool and supply chain expertise, said Vena, who added that he would like to see Alienware’s typical lead times of four to six weeks reduced to Dell’s schedule of less than 10 days.

The bulk of Alienware’s business is conducted in the U.S., but Dell’s muscle may give the company more reach into other markets, said Vena. The company has a small number of Canadian clients, but its all its sales are conducted in U.S. dollars.

“We haven’t really focused on Canada as a key market, although we do have Canadian customers. That could possibly be an opportunity as a part of this (acquisition),” said Vena.

Rahul Sood, president of Calgary-based gaming system builder Voodoo PC, said he doesn’t perceive the Dell-Alienware acquisition as a threat. According to Sood, any interest in the gaming market serves to legitimize his business, including Dell’s foray into the market with its XPS line.

“It’s created more awareness on the market (for gaming PCs),” he said. “It’s taken would-be mainstream customers and turned them into gamers. It’s expanded our market reach.”

Even though Dell acquistions are rare, Sood said he wasn’t surprised to see it shell out for Alienware. “Besides taking out a competitor, I think there’s a lot of motives for Dell. . . . It gives them another brand that they can plug into their direct model engine. It gives them influence,” he said.

Like Alienware, Voodoo does most of its business in the U.S. – about 80 per cent, said Sood. Both companies also use Intel and AMD in their products, unlike Dell which only uses Intel processors.

Blackburn dismissed speculation that Alienware’s relationship with AMD would give Dell a means to transition any of its products away from Intel architecture. “If that were our strategy and intent, we could do that without acquiring a company. That was not the motivation for this.”

Alienware is only Dell’s third acquisition in its 22-year history. In 2002 it bought services company Plural and in 2000 bought storage networking provider ConvergeNet.


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