A chat with Michael Dell: Alienware and XPS to stay separate

Grapevine (TX) - While custom PC builder Alienware may benefit from the much-increased purchasing power of its new corporate parent, Dell Computer, the development tracks of the two companies will remain separate. The reason, as Dell Computer Chairman Michael Dell revealed to TG Daily during a roundtable session with journalists on Sunday afternoon, is because his company's top-of-the-line XPS performance systems and Alienware's product line are targeted toward separate customer bases - still segments of the same gaming and enthusiast market, but still measurably different.

"I think what we've seen is that [the gaming and enthusiast segment] is a pretty big market," Mr. Dell told reporters, "and XPS has done quite well, [and] the Alienware brand has done quite well. We think their appeals are slightly different. The development teams are continuing on with the strategies that they've had, which are really very different. Each one has its own customer base."

According to Dell's own internal research, which Mr. Dell cited, the Dell and Alienware brands combined share 60% of the high-end gaming and enthusiast computer market in the US. Mr. Dell admitted there were few independent statistical measures of this market, but that he relies on internal figures.

It's a pretty simple equation, as Michael Dell sees it. Alienware and Dell reach separate segments of the same market, and should continue to do so.

Mr. Dell's comments came by way of introducing the XPS 700, the company's new top-of-the-line desktop PC, which unmistakably targets the high-end. The system not only will be Intel's first to ship with Nvidia's GeForce 7900, but will be available in an SLI configuration with two 7900s on-board. The 700 also features a model of Intel's Core 2 Extreme processor series so new that Intel hasn't announced it yet. In fact, Dell is actually waiting for Intel to make the formal announcement - which could come this week.

"XPS is really targeted at a first-to-market cadence with the key inflections, in terms of processor and video and other key ingredients," Michael Dell told reporters. As processors, graphics cards, and other components continue to be updated in four- and six-month intervals, he said, the buildouts of desktops and notebooks under the XPS brand will continue to be refreshed. "It'll be refreshed at a very, very fast rate - quite different from other product lines that we have. We're selling hundreds of thousands of computers to big, mega-corporations; they do not want them to change like that. They want a high level of consistency. This market [XPS] is totally different."

What information will XPS be able to glean from Alienware, TG Daily asked Mr. Dell, with regard to what direction to take successive waves of buildouts? He struggled at first to come up with a workable answer, pausing for several very telling seconds. Finally, he said, "We know there are benefits for the Alienware team, tapping into the Dell supply chain...We really want these teams to develop products independently. There's really a different product development ethos, and we don't want to disturb that. They're going to continue developing products in the way that they have; both have succeeded with different models, and we want those to continue."

So if Alienware were to come up with a really cool, feature-of-the-month model based on, say, an AMD Athlon 64 X2 processor, that wouldn't necessarily give the XPS division any ideas? Mr. Dell would only nod his head, yes.

Later, we took Dell Computer's Rocco Ancona aside - he heads the company's XPS engineering team. Essentially, the XPS 700 is Ancona's baby. We asked him, when he heard the news that Dell was buying Alienware, did he shout "Goody!" like an excited child, or did he instead ask why? "You know, you always look at your competitors," he responded. "I thought it was a good purchase for Dell. In fact, I'm excited by it. We compete with each other, still. We're still friendly competitors. I have every interest as a shareholder in wanting the brand to be successful. Likewise, as an employee, I want the XPS brand to be successful."

Still, Ancona acknowledged, he wants XPS to be the first out of the gate with a new feature.