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Alienware vs. VoodooPC, 3 years out

By - Source: Tom's Hardware | B 0 comment



Analyst Rob Enderle looks for TG Daily into his crystal ball : The market for gaming PCs is about to go through some massive changes as the Dell acquisition of Alienware and the HP acquisition of VoodooPC matures. Join us for a look ahead to see what could result from the deals, assumed both will be successful. How will Alienware and VoodooPC compete with each other in the future ?

To do and exercise like this, you have to profile the companies who are building this future and consider what each brings to the table. So, let’s get a better understanding of the two companies first.

Alienware is the largest of the specialty PC houses with solid product lines that not only address performance consumer buyers but performance oriented corporate and government buyers. They had experimented with retail several years ago but those experiments went badly and sell only direct today. With one of the most unique and well recognized industrial designs in both their laptop and desktop lines they are also come out on top in product placement in TV shows and movies for their class of company.

Most recently, they were the first to put an SLI system in a notebook computer, thought to be impossible before they did it. If we were to compare AlienWare to a car company, they would be a Jaguar that didn’t have the historic British quality problems.

Dell brings some of the strongest logistics, direct sales, and web skills on the planet to the mix. They are second only to Amazon in the on-line retailer space and have strong lines and competencies in every aspect of the hardware business. While they historically have not been the most innovative company, they have brought out solid advancements in their XPS line and have recently begun to try to actually drive new standards. In addition, while their past history ties them to Intel’s hip, they recently started doing the AMD dance, which is likely to be vastly more capable in three years. Lately they were the first to put four video cards into a single, very expensive, desktop computer. Finally, their marketing has improved and they currently out do Apple in TV product placement. If we were to compare Dell to a car company, they would be a healthier Ford.

HP has recently moved past Dell into the number one PC slot largely due to line improvements and a strong retail presence at a time when retail is becoming the favored way for consumers to buy PCs. Recently stepping up a solid, Apple like, retail campaign (driven by ex-Apple marketing people), HP has also redesigned its laptop lines using printer related technology that makes them stunning to look at while retaining their aggressive market pricing.

With IBM’s exit from the PC business HP now has the strongest research and development unit of any of the PC vendors. HP is even broader then Dell and also dominates the Printing and Imaging space and is building a services capability that is already market leading in the PC space. HP has extensive experience with both Intel (co-developed the Itanium processor with Intel), and AMD (was the first of the major vendors to bring out broad desktop and laptop AMD based offerings). HP would be closest to GM in its heyday.

VoodooPC is substantially smaller than Alienware but is known for providing a more customized customer experience as well. Currently they offer the highest degree of customization in the segment with vast color choices across a variety of desktop and laptop products. They have been outspoken fans of AMD and have expressed their disappointment with Intel often. Voodoo has been aggressive with technology and is known for their unique lighting and out of box experience. Smaller and more exclusive than Alienware, they are more like a specialty car maker like TVR or Jenson.

In a macro way, these are very different mixes, Alienware is alike an early Dell while Voodoo was on a path very different than any of the other vendors we are talking about here. As a result, if both are successful, the result could be quite different as well with Voodoo representing the greatest risk and the greatest possibility of change for HP.

Risks

Even though we are going to assume these two will be successful, we should stop and mention the risks. Mergers often go very badly. In my experience, few have met the expectations set for them. Both of these mergers have vast size disparities which mean they won’t be particularly material to the parent company regardless of how they turn out. For Dell the changes may, even if positive, be hardest to see because they already had their XPS line. From a cultural standpoint, this should be the easier of the two mergers but it also has a lower potential to change Dell which was already on a path of change before the acquisition.

Voodoo is a very small company - with folks used to doing what they wanted - that now merges with an old style company where a bureaucratic process is a way of life. This could either be a breath of fresh air for HP or a cold shower for the Voodoo folks. Fortunately, HP treats their employees very well but the differences will be very jarring and learning how to play the politics will be critical to the success of this effort. However, if successful, HP will gain the greatest benefit because they have no gaming presence and no real position on the performance side of the PC market.

Dell/Alienware evolution

It generally takes three to five years for a merger to settle and the benefits, or the catastrophic results, to emerge. Once again we are going to assume both will be successful and apply what we know about the companies to formulate a result.

The easiest, in this regard, is the Dell Alienware merger. Clearly, Alienware will benefit from the lower acquisition costs associated with Dell’s market leading supply chain and from improvements to their direct sales model. The XPS Line and Alienware Line will probably diverge with XPS being more of a performance product for those that don’t want a lot of flash and the Alienware line targeted at those that really want to stand out. Both lines will likely provide a lot of value for the dollar but the Alienware PC will be the true premium product commanding the highest prices while XPS will be positioned below it.

When it comes to the digital living room, XPS will probably get that mission with an industrial design that flows out of high-end consumer lines like Denon. Alienware will most likely remain solid on performance and gaming and will have the greatest connections to tournaments and LAN parties the industrial design will evolve but continue to have an alien theme. In short, both XPS and AlienWare will become more focused but their changes will be evolutionary with the strongest visible benefits being increased volume and lower price for Alienware, and transition of the XPS line into more of a luxury line than a performance line.

HP/VoodooPC revolution

As mentioned above, this is the more risky, in terms of success, but it also has the greatest potential for radical change. HP brings to the table one of the most powerful intellectual property portfolios in the market. If Voodoo can tap it, the result may be revolutionary.

Think about vast improvements in reliable over-clocking, systems that have no peer in terms of absolute performance, granted at what will likely be a premium price. Imagine creative use of light, where the light the system emits increases as performance increases. Imagine systems that can be remotely administrated so that the consumer gets an appliance experience but without giving up the capabilities mentioned above. Kind of like having the benefits of driving a Ferrari but with the reliability of a Toyota.

Going beyond that and looping in Printing and Imaging, while Apple may actually do this first, HP will eventually be able to apply their advanced printing skills to retail PC customization. Although Voodoo will likely remain direct, the retail lines will benefit from a more aggressive industrial design and the ability for custom colors, using a modification of HP’s market leading Ink Jet technology, to create systems that are uniquely personal.

So the end result will likely be a retail PC line that has no match in the market with regard to personalization and customization, and a performance line that pushes the envelope for ultimate performance and dynamic special effects and coloring.

Who Wins ?

It depends on the customer. These two changes, but particularly the HP direction, could create an excitement in the PC segment we haven’t seen this decade. Amazing systems from Dell and incredibly affordable prices, or incredible systems from HP that are so uniquely yours that there may be no two exactly alike. If this works, that is the future, and I think it is one to really look forward to. So Who Wins ? I think we all do.

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