After recent discussions about Dell I thought that this may be of interest
...
http://www.nzherald.co.nz/section/story.cfm?c_id=5&objectid=10374699[1]
which reads
"
Dell looking to abduct some alien attributes 28.03.06
By Mathew Ingram
Dell is a giant computer maker, the world's largest seller of desktop PCs,
with a direct-sales, discount-price model and a supply chain that is second
to none - and, despite its attempts to get a little hipper over the past
yearor two, a reputation for selling boring but dependable products.
It has annual revenue of about US$56 billion ($92 billion).
Alienware is pretty much the antithesis of that: a tiny company - revenue of
about US$170 million - with a reputation for selling a relatively small
number of high-priced, high-performance computers, mostly to video-game
players and other uber-geeks.
One of its most popular models is shaped like the giant alien heads that are
drawn by many alien-abduction believers.
What do these two have in common? Well, they're family now - the big, boring
discounter just bought the tiny, high-priced PC maker (which is based in
Miami) for an undisclosed sum, after several days of denying the rumours
thatsuch a deal was in the works.
Why? A good question. According to most analysts, the purchase, which is
onlythe third in Dell's 22-year corporate history, is likely to barely make
aripple in the giant cashflow that is the company's PC business. Prudential
Equity analyst Steven Fortuna told Marketwatch that, based on Alienware's
2005 revenue and shipments, the company is equivalent to about 2.2 per cent
of Dell's US consumer sales, and less than 0.3 per cent of total revenue.
But he and other analysts said that the purchase could help juice what has
been a relatively lacklustre part of Dell's business - that is, the retail
orconsumer PC market. Consumer sales only account for about 15 per cent of
the company's revenue, with the vast majority of Dell's PCs being sold into
the corporate market.
Last year, Dell's consumer sales rose by a 1 per cent, compared with growth
of 18 per cent for Hewlett-Packard, one of the company's main competitors.
Analysts say Alienware's sales have risen by about 30 per cent this year, to
US$225 million.
Shaw Wu of American Technology Research said the deal "demonstrates that
Dellis taking steps to address its weaknesses, including strengthening its
consumer business".
The company is also likely looking for ways of boosting its languishing
shareprice, which has tumbled by about 30 per cent this year. Some investors
seem to have switched their allegiance to Hewlett-Packard, which has seen
itsshares climb by about 70 per cent this year. JP Morgan analyst Bill Shope
said Dell was beginning to take some decisive steps to repair its recently
volatile consumer business.
He said the purchase moved Dell's focus to the higher end of the consumer
market, where profit margins were greater.
Rebecca Runkle of Morgan Stanley said the Alienware deal was evidence that
Dell was making "the right investments".
"Industrial design and hip branding are two important factors in the
high-endconsumer and gaming PC segments and, quite frankly, Dell lacks in
both these areas," she said.
Some saw a further wrinkle to Dell's acquisition: the possibility that the
PCmaker could soon start offering products based on processors from Advanced
Micro Devices, which competes with PC chip giant Intel. There have been
repeated rumours over the past few years that Dell was about to abandon its
exclusive relationship with Intel in favour of lower-priced AMD chips. Some
said the purchase of Alienware - whose products use AMD chips - could mark
the beginning of a change at Dell, and a possible move to AMD.
In fact, these rumours were so pronounced that AMD's stock rose more than 3
per cent after the deal with Alienware was announced. But several analysts
poured cold water on the idea.
Raymond James analyst Ashok Kumar said that the Alienware acquisition was
unlikely to change Dell's reliance on Intel chips. "For the foreseeable
future, Dell will remain an 'Intel only' house," the analyst said.
Whether the Alienware purchase will lead to an AMD deal or help Dell boost
its share at the high end is an open question. If nothing else, it might
helpthe giant maker of boring, grey boxes become just a tiny bit hipper.
--- Links ---
1 http://www.nzherald.co.nz/section/story.cfm?c_id=5&objectid=10374699
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