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XPS vs. Xbox

A chat with Michael Dell: Alienware and XPS to stay separate
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Inside the XPS 700, powered by Intel's Core 2 Extreme and two (2) GeForce 7900 GTX cards.

It's the fact that the PC market can rapidly respond to market demand with new hardware features which makes the PC the more competitive gaming platform when compared to game consoles, Mr. Dell argued earlier in the discussion. "The challenge with the [game] console," he said, "is that it has a fixed function for five years. Consoles are fine, but really, the console is just a dedicated, single-purpose machine." When Nvidia released its GeForce 7800 GPU, he recalled, it was utilized by both PC and game console manufacturers. Already, though, the XPS 700 is preparing to top that introduction - by Mr. Dell's description, in orders of magnitude. "The brand new console comes out, and for five years, it's stuck with this 7800 chip; meanwhile, every three or four months, we're coming out with faster things."

"If you talk to [game] developers," Mr. Dell continued, "[they're] not super-excited about console environments, because from an economic standpoint, they have to live within this structure that's created by the console, and they give up a lot of the ongoing revenue. So you actually see a lot of games...that are not available on the console at all, World of Warcraft probably being the best example out there. Here's a great game played by six-and-a-half million people, not available on the console, no plans to be available on the console."

Also detracting from game console's long-term viability, Mr. Dell argued, is its revenue model: Consoles are sold at a loss, he related, in order to seed the market. Manufacturers' revenues are reaped in royalties, but it's those royalties - which should more than make up for the losses - which are the biggest contributor to the high price of console-based game software. In turn, Mr. Dell implied, it's the high price of software which is the biggest detractor to newcomers to console gaming.

"It's capitalism; everybody can have their own way of doing things," shrugged Mr. Dell. "It's just, if you want to have the latest hardware, the absolute best machine, you're not going to buy a console."

Of consolidation and substitution

Michael Dell says his company doesn't take too many cues from Alienware. Then his team shows off this XPS notebook system.

Also in Sunday's roundtable discussion, Mr. Dell gave some clear, if non-descriptive, hints that a future announcement regarding Dell Computer's relationship with AMD is forthcoming. In May, Dell announced it would be using AMD Opteron CPUs in multi-processor Dell servers; and by virtue of having acquired Alienware, Dell already is in the business of producing AMD-based systems for the enthusiast segment.

Dell's decision to take on AMD as a CPU supplier comes in the midst of a PC market that is undergoing another wave of fundamental shifts. While the market is still growing by most estimates, the rate of growth of that growth is declining, and the weight of the market has tipped away from desktop units and toward notebooks. At the same time, the video game market is booming - now an $11.5 billion annual industry, using numbers Michael Dell cited, compared to $9 billion in revenue for the cinema.

The XPS 700 - or, more accurately, Dell's top-of-the-line XPS desktop system at any one point in time - could very well represent the overlap in these two markets: the one that's expanding, and the one that's declining. We asked Michael Dell, could we be seeing in the XPS desktop the prototype for the last desktop systems?

Mr. Dell's response was less than emphatic. "I don't think so," he began. "There's a substitution going on between desktops and notebooks. When you look at overall microprocessor volumes, [the PC market is] still increasing. So the PC market is actually still growing, and it's growing in lots of areas." But driving that growth, Mr. Dell then said, was the need for mobility, as emphasized by the addition of such features as HSDPA and EV-DO networking in his company's top-of-the-line notebook systems.

Which led Mr. Dell to conclude, since his company is perceived as a notebook systems leader, he's in good shape anyway. "Desktops go down, notebooks go up, that's not all bad. Dell's the leader worldwide in both notebooks and desktops." So in an evolving market over a five-year timeframe, if the desktop market pretty much dwindled away leaving the notebook market with the lion's share, he'd be okay with that, we asked him? Again, Mr. Dell gave one of his signature pauses, followed by a small shrug, and a little nod of the head.

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  2. XPS vs. Xbox