HP Puts Its Gaming Hopes in VoodooPC

HP has bought the gaming PC maker in a surprise acquisition. But it's unlikely to deflect attention from the ongoing scandal

If you're a computer maker in a funk these days, it looks like the strategy of choice is to go out and buy a gaming PC maker. Back in March, the struggling Dell (DELL) agreed to acquire Alienware, a Miami-based maker of high-end PCs popular with gamers. Then on Sept. 28, the embattled Hewlett-Packard (HPQ) made a surprise acquisition of VoodooPC, a small, privately held Canadian company that also makes gaming-oriented personal computers.

The deal won't change the headlines about HP. It came on the very day that CEO Mark Hurd, attorney Larry Sonsini, and former Chairman Patricia Dunn were grilled by a congressional subcommittee over whether HP used illegal methods to uncover the source of leaks on its corporate board (see BusinessWeek.com, 9/29/06, "HP Goes to Washington").


  Still, the deal surprised the computing world. Although VoodooPC commands a great deal of loyalty among its customers, it's a tiny player in the computer market. It sells fewer than 4,000 PCs a year; HP likely will sell more than 30 million this year.

VoodooPC, launched in 1991 by brothers Ravi and Rahul Sood, has made a name for itself selling hand-built, customized high-performance computers aimed at serious gamers with big wallets. Carrying names like Envy and Omen, they sell at a considerable premium over mainstream computers. An Envy notebook recently reviewed by BusinessWeek.com sells for more than $3,700, while its flagship Omen line of tower PCs can easily command more than $5,000 (see BusinessWeek.com, 7/21/06, "Voodoo's Aptly Named Envy").

The move comes six months after Dell's acquisition of Alienware (see BusinessWeek.com, 3/23/06, "Dell Goes High End and Hip" and 3/24/06, "Can Alienware Keep Its Cool?"). President Rahul Sood had famously predicted the Dell-Alienware deal in a posting on his personal blog on March 1 only to be proved right weeks later. Sood later said that he had been contacted by Dell Chairman Michael Dell, prior to the Dell-Alienware deal.


  In a blog posting today, Rahul Sood, the outspoken, public face of the company, described the genesis of the deal with HP: Dropped hints made to various HP execs over the last year that resulted in some interest, but no serious discussions. But after Dell acquired Alienware, a well-timed e-mail from Sood to HP CEO Mark Hurd generated significant interest.

"All it took was one e-mail to Mr. Hurd with a short explanation of our strategy, and all of a sudden the sea was parted and we had people contacting us," he wrote.

Terms of the deal were not disclosed, but Sood said that he will be taking the position of chief technologist for HP's gaming division, while Ravi Sood will become chief strategist for that division. Both will report to Phil McKinney, who is CTO of HP's personal systems group. VoodooPC, he said, will continue to be based in Calgary.

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