HP Buys Into Gaming PCs

Shortly after its CEO Mark Hurd and former chairman Patricia Dunn were castigated and reproached at length by a House of Representatives subcommittee, Hewlett-Packard announced Thursday that it had acquired VoodooPC, a high-end gaming PC vendor. Terms of the deal were not disclosed.

HP’s move follows a few months behind Dell’s acquisition of Alienware, another vendor in the fast-growing gaming-PC market.

Unlike Dell, HP will take a different tack in its post-acquisition integration of VoodooPC into its corporate fold. Whereas Dell has left Alienware as a wholly separate operating division — even continuing to sell its pre-existing XPS line of gaming PCs — HP will take something of a hybrid approach, keeping the VoodooPC brand and allowing the company to remain based in Calgary, Alberta, but also integrating VoodooPC into a separate business unit, focused on the gaming industry, within its personal systems group.

VoodooPC co-owner Rahul Sood will become chief technologist for the HP Gaming unit, and his brother and co-owner Ravi Sood will become the division’s director of strategy. Both will report to Phil McKinney, chief technology officer for HP’s PC business.

The intent of the integration plan is to allow HP to benefit from direct exposure to the demanding requirements of gaming enthusiasts, who typically don’t mind paying a small fortune for their machines, so that leading-edge innovations for gaming platforms can be incorporate into mainstream PCs. Additionally, VoodooPC will benefit from access to HP’s research-and-development programs as well as from the larger company’s established relationships with component suppliers.

Obviously, HP won’t object to the higher margins that accrue from sales of gaming systems.

Even though VoodooPC’s sold approximately 4,000 units in the past year compared to HP’s PC shipments of more than 30 million units, HP’s McKinney said various estimates suggest the game-PC market is worth $3 billion to $5 billion per year. It’s clear that HP is motivated by the growth and high-end cache of the space, not to mention a competitive imperative to counter Dell’s move into the market.

It remains to be seen whether HP or Dell has taken the better approach with regard to integrating (or not integrating) its gaming-PC acquisition.

There’s less risk involved with the Dell approach, but there also are fewer spin-off benefits to be had. HP is taking a more complicated, ambitious approach, one that is fraught with integration risks — there’s a real danger that VoodooPC could be utterly subsumed and diluted — but might pay off enormously if HP’s vision comes to fruition.

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