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Dell, Gateway Entry Boosts Gaming PCs

6/05/2006 02:00:00 AM Eastern

Rather then show concern over the arrival of Dell and Gateway into the gaming PC category, specialty manufactures like VoodooPC and Velocity Micro say these newcomers are proving to be a huge plus for their market.

Instead of stealing business from the smaller players that already inhabit the gaming and high-end PC niche, Dell and Gateway are exposing hordes of new customers to the world of the premium-priced computer. The growing popularity of the pricey PC is also attracting new manufacturers, like Systemax, into the consumer market. Systemax's primary business is as a supplier of computers for the VAR/reseller channels and as an OEM, but in May it released its first models designed for the gaming market.

“The presence of Dell and Gateway legitimizes the space. It gives mainstream customers more awareness of our systems,” said Rahool Sood, CEO of VoodooPC, referring to Dell's introduction of its high-end XPS line and its recent acquisition of high-end gaming PC maker Alienware, along with Gateway now selling powerful $4,000 units for gamers and enthusiasts.

“Interest is now much higher in gaming and multimedia PCs for us. People are looking for a more immersive PC experience. People are realizing that they want to do more with their PC, and their $399 model just isn't doing it for them anymore,” said Randy Copeland, company founder and CEO.

The desire for high-end PCs has grown to such an extent that Best Buy is selling three Velocity Micro SKUs with prices of $1,699, $1,999 and $3,199, well above the commodity-level price at which most PCs are sold. Velocity has also set up a micro store on BestBuy.com for customers who with to configure a Velocity computer.

VoodooPC is also eyeing some type of retail deal, one that Sood would not expand upon at this time. In addition, Voodoo is looking to develop a more moderately priced product for the large number of people who are fans of the brand, but cannot afford to make a purchase. The company Web site receives about 1.5 million visitors per month, but most of those individuals are just window shopping.

Velocity Micro markets its merchandise as an overall high-performance PC for enthusiasts who want the best hardware, along with personalized customer support, and not just a killer gaming system. Copeland said this mindset includes not giving the models high-octane names typically found in the industry. However, gaming is still a huge draw for the company, and Velocity does include gaming PC ploys, such as placing windows on the chassis to expose the interior workings, Copeland said.

Sood estimates that 25 percent of his customer base are hardcore gamers.

This interest helped convince Systemax to not only get into the business, but develop a brick-and-mortar retail position for its products as a stepping stone to expose more people to mainstream Systemax products. CompUSA and Office Depot currently carry Systemax business-oriented models, but the company has no plan to introduce its new Wildcat gaming PC into the stores any time soon.

“We see gaming as a prestige play. If we can establish Systemax in the gaming world, then that will spill over to our mainstream business,” said Systemax executive VP Richard Wallet, although he does not expect gaming PC sales to become a large part of the company's business.

Not only is the newfound competition from big-time PC makers proving beneficial, but Sood and Copeland welcome the avalanche of new game consoles from Microsoft, Sony and Nintendo scheduled to hit the market.

“The console is not a threat but is complimentary,” Sood said, “and we intend to offer it with our systems.”

“Consoles are a huge benefactor for us — they bring even more attention to gaming. Our sales jump whenever one of these devices comes out,” said Copeland, who said the Xbox acts as a Media Center Extender and is a natural companion for a PC.

All of this interest in high-end PCs is taking place despite the fact that PC gaming software sales are sagging, not growing, according to Port Washington, N.Y.-based The NPD Group. Sood said figures such as these only tell one aspect of the story. Those buying the games available are truly into these games, to the point where they will pay the $20 or so per month it costs to play them in an online community.

Steve Baker, industry analysis VP for NPD, agreed, saying the gamers are very brand loyal and are the source of a great deal of revenue for the hardware and software companies, despite the small size of each market. Baker compared the situation to what is taking place in the digital camera arena where digital SLR cameras sell in comparatively small numbers, but generate a great deal of revenue due to high average-selling prices.