Dell buys maker of game PCs

PC giant Dell has agreed to buy gaming computer maker Alienware as part of a push into the lucrative gaming market that could help the market-leading PC maker boost profit.

Terms of the transaction were not disclosed but a Dell spokesman said the acquisition was financially immaterial to Dell, which had revenue of $55.9 billion (€46.7 billion) last year compared with Alienware's $200 million.

The announcement confirmed the worst-kept secret in the PC industry. The rumours first began to circulate at the beginning of the month when Rahul Sood, chief executive of Alienware competitor VoodooPC, posted on his blog that such a move would make sense for both sides.

Both Dell and Alienware representatives said they would not comment on rumour and speculation, though neither company denied that an acquisition was in the offing.

The Alienware acquisition marks a change in corporate strategy for Dell, which has generally shunned acquisitions in favour of organic growth. At first glance the corporate-focused Dell and the 10-year-old PC company that began life making customised PCs for gamers could not seem more different. But there are some similarities and many reasons why the deal is appealing to both companies.

Both operate a direct sales model selling to customers through their websites and over the phone. Alienware has expanded successfully into Europe - it employs 80 at its IDA-backed European operations centre in Athlone - and Asia, but now it will have access to funding for worldwide expansion. It will also benefit from Dell's famously efficient supply-chain expertise.

Dell will also improve its financial performance having disappointed investors with lower than expected revenues in recent quarters. With Alienware PCs retailing for as much as €7,000 with all the available options, there looks to be room for Dell to improve its margins. Alienware is expected to have revenues of about $225 million this year.

Dell seems to be aware of the value of that brand to consumers and has stated that Alienware will continue to operate under its own name as a totally separate subsidiary. Given that announcement it seems unlikely the deal will have any impact on either company's operations in Ireland.

A surprise loser could be chip-maker Intel. Dell has always resisted offering systems with chips from its arch-rival AMD. Alienware has favoured AMD over Intel and industry analysts have said that Dell systems powered by AMD are now more likely.