Dell to Acquire Alienware

UPDATED: Dell  has put the industry buzz to bed about Alienware. The number one computer maker announced today that it would buy the high-end maker of PC and gaming PCs.

Terms of the deal were not disclosed. But Dell said Alienware would continue as a subsidiary once the deal closes, and will maintain its own product development, product marketing, sales, technical support and other operations.

The deal could be worth as much as $400 to $600 million, according to analyst Roger Kay of Endpoint Technologies Associates.

“This is a company with real profits and a real brand recognition,” Kay told “It’s also a new thing for Dell since they haven’t bought a company and maintained it as a separate subsidiary before that I know of.”

Before the deal was announced, Dell’s stock  was up almost half a percent Tuesday to 30.41. Dell’s been trading in the high 20’s to low 30’s this calendar year, but reached the 40’s last summer. Dell spokesperson Jess Blackburn told he didn’t think the deal would “have any material affect on Dell’s financial status.”

Since Alienware uses AMD, as well as Intel’s processors in its systems, Dell automatically becomes a buyer of AMD chips, something it continues to resist for its name brand line of desktops and servers. Kay said he doesn’t think the Alienware buy will change Dell’s Intel-only position right away because Intel’s latest roadmap indicates it’s closing the performance gap versus AMD.

Kay also said there’s not enough financial upside for Dell to add AMD when Intel could simultaneously cut Dell’s market development funds and mitigate any gains. But, notes Kay, as it stands, the deal should allow Alienware to get Intel processors at lower prices under the volume terms Dell already commands.

“This gets AMD’s nose under the tent and there is certainly the potential for its relationship with AMD to expand over time,” said Kay. “But Dell didn’t do this deal to get AMD; if Dell wanted AMD they wouldn’t footsie around, they would just do it.”

Ironically, speculation about the Dell acquisition was sparked by a blog entry by Rahul Sood, CEO of Alienware’s chief competitor VoodooPC. In an interview with Sood said he does not feel threatened by the acquisition and feels Dell’s entry is a good thing for company’s like his because it raises the profile of the market for high end gaming systems.

“There are only a few companies in this end of the market with brand strength, Alienware is one, VoodooPC is another. Acquiring Alienware makes Dell look cool,” Sool said. “But this is absolutely good for our industry.”

Dell said it plans to continue to also offer its own line of high end gaming PCs under its Dell XPS brand.

“Both Alienware and Dell have tremendous optimism in the future of the PC platform as the center of the digital home from an entertainment and digital content management perspective,” said Alienware CEO Nelson Gonzalez in an essay posted at the company Web site.

Gonzalez continued that both he and Dell executives agreed to keep Alienware a separate subsidiary so it can continue delivering “bleeding edge” technology. He said one of the most surprising aspects of the purchase is that not a lot is going to change.

“You’re not going to see Alienware logos show up on Dell products and vice versa,” said Gonzalez.

News Around the Web