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March 22, 2006

Dell acquires Alienware

Tom Krazit at CNET:

Dell has agreed to purchase gaming PC maker Alienware, in a rare acquisition designed to improve Alienware’s supply chain and boost Dell’s standing among PC enthusiasts.

Financial terms of the deal were not disclosed. Alienware will operate as a wholly owned subsidiary of the world’s largest PC maker, said Nelson Gonzalez, chief executive officer of Alienware. Gonzalez will now report to Jim Schneider, Dell’s chief financial officer, but the company will operate separately from Dell, he said.

A Dell representative confirmed the deal, but said the company was deferring comment until later on Wednesday.

There are more details in the article, but it appears the calim is that Alienware will operate semi-autonomously. While not as bad a match as the HP acquisition of Compaq, there still was some adverse comment about overlap:

“I still think it’s a bad idea, and a bad fit,” said Stephen Baker, an analyst with NPD Techworld. Alienware’s customers buy from that company in part because of its image as a technology-driven company that understands the needs of gamers, while Dell is viewed by those customers as a stodgy corporate supplier.

The deal also could mean that Dell has to rethink its consumer PC strategy, said Roger Kay, principal analyst with Endpoint Technologies Associates. The company has sunk a lot of effort into building its XPS lineup of high-end desktops and notebooks for gamers and multimedia enthusiasts. Now, it looks like those systems compete with Alienware in certain areas, he said.

Alienware sells very powerful and very expensive PCs to the top tier of the gaming market. Dell, on the other hand, has a stronger identity with casual gamers who want a good PC but don’t want to pay Alienware prices. Both companies have recently tried to appeal to gamers that fall in between those two groups, with Alienware reaching down and Dell reaching up, Kay said. It’s unclear how those strategies will continue.

Not unexpectedly, some Alienware fans are already expressing their displeasure. Ed Bott says, “So long, Alienware, it was nice to know you”:

Pretty soon Dell customers will be able to spend $10,000 for a PC.

It will be interesting to see how those first buyers react when they have a problem with that Dell PC and get shunted into the world’s worst technical support system.

In the six months or so since I last wrote about Dell, their service has become worse. I’ve now been waiting 24 days for Dell to repair a defective motherboard on a notebook computer that’s still under warranty. The sheer incompetence of their support organization is breathtaking.

If you’re thinking of buying a Dell – or an Alienware – think again. There are plenty of well-run companies you can give your business to.

Finally, John Pain from the AP has a nice background story on the people who built Alienware.

Posted at 6:39 pm. Filed under Alienware, Companies, Dell, HP

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