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Computer Hardware & Software
Dell Beams Up Alienware
David M. Ewalt, 03.22.06, 6:30 PM ET
By This Author
David M. Ewalt
New York - Michael Dell is buying Area 51--but this is no secret deal between the CIA and the Dell Computer chief executive. Dell announced Wednesday that it will buy boutique-computer maker Alienware, which makes high-end PCs for hard-core videogame players. The company's machines are branded with a distinctive, bug-eyed alien face and named after spacey subjects like "Area 51."
"Alienware's products are an excellent complement to Dell's own line of high-performance computers designed for gaming-enthusiast and media-content customers," Michael Dell said in a statement. "In addition to offering high-quality, high-performance products, Alienware has tremendous brand appeal with consumers and creative business professionals."
Though Dell (nasdaq: DELL - news - people ) representatives had denied a deal was in the works as recently as last week, speculation about a deal has been rampant, thanks in large part to blog posts by Rahul Sood, CEO of Voodoo PC, an Alienware competitor. On March 1, Sood argued that Dell needed to buy Alienware, in part to position itself better against Apple Computer (nasdaq: AAPL - news - people ), which has begun producing computers based on Intel (nasdaq: INTC - news - people ) chips.
"With the recent Intel/Apple relationship, it's clear that 15% (or whatever) of the consumer space for Dell may not be enough," wrote Sood. "Apple is likely to go to 8% with the help of Intel, over the next year or so. The PC-gaming market is threatening Dell's 'perceived technology leadership'--and ultimately the consumer space."
It's also likely that Dell's interest in Alienware has largely to do with branding; the Dell brand has become synonymous with mainstream, family PCs, while Alienware's cutting-edge cool has a strong following among young gamers and power users.
Alienware has also gained some traction in recent years by selling its powerful machines to businesses. And while that market is still small, the PCs are increasingly being used in graphics applications and to perform high-end engineering. Alienware's corporate customers include Boeing (nyse: BA - news - people ), Lockheed Martin (nyse: LMT - news - people ), Raytheon (nyse: RTN - news - people ) and the U.S. Navy.
Following completion of the transaction, Alienware will operate as a wholly owned subsidiary of Dell, maintaining its own brand, product development, marketing, sales, technical support and other operations. The management and founders of Alienware will continue to operate the company as a standalone unit. Financial details of the transaction were not disclosed.