Dell Got Game With Alienware Buy

With the purchase of the gamers' PC maker, Dell may also be able to sell AMD processors.
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For

Dell

(DELL) - Get Report

, the road to

Advanced Micro Devices

(AMD) - Get Report

may run through Miami.

That's where PC maker

Alienware

, which Dell announced it was acquiring late Wednesday, is based. Though the acquisition gives Dell a huge boost in the market for high-end gaming PCs, it also gives the company a backdoor way of selling AMD processors.

Alienware sells PCs, as well as severs and workstations, with both

Intel

(INTC) - Get Report

processors and AMD processors.

Dell, of course, sells Intel-based PCs exclusively. That approach has hurt the company recently, say analysts, given that many consumers consider AMD microprocessors technologically superior to Intel's at the moment.

"Let's just assume for a moment that they keep

Alienware's product lineup. Then certainly it does create a little tiny avenue for AMD to enter into a relationship with Dell," says Insight 64 analyst Nathan Brookwood, adding that it was too early to say whether Dell would in fact continue offering Alienware PCs with AMD chips.

Dell derives many advantages from using only Intel processors in its PCs. Building PCs with only one type of processor keeps logistical costs down at a company that is concerned about every penny, says Brookwood.

And Dell has a lot of leverage when it comes to negotiating discounts and rebates with Intel every quarter, thanks to its exclusive relationship.

By having a second product line like Alienware, however, Dell could offer AMD chips without jeopardizing its relationship with Intel.

"It would be a softer kind of way of taking that first step," says Brookwood.

Although rumors of the Alienware acquisition had swirled around the Internet for weeks, many people deemed it unlikely given Dell's historical reluctance to grow through M&A.

Furthermore, Alienware is a small company known for specialized products, particularly high-end gaming systems, and customer service; whereas Dell is a large company with a reputation for plain, low-cost PCs.

In recent years, though, Dell has increasingly targeted the market for high-end gaming systems with its XPS line of PCs.

Dell did not disclose how much it paid for Alienware, but said it has entered into a definitive agreement to acquire the company to further satisfy the growing number of consumers and businesses seeking the highest-performance PC products.

"Alienware's products are an excellent complement to Dell's own line of high-performance computers design for gaming, enthusiast and media content customers," Chairman Michael Dell said in a statement.

According to Dell, Alienware will operate as a wholly owned subsidiary after completion of the transaction and will maintain its own product development, product marketing, sales, technical support and other operations.

Alienware's management will continue to operate the company as a standalone unit of Dell.

In a statement posted on the Alienware Web site, co-founder Nelson Gonzalez said that Alienware's business autonomy was a crucial part of the deal.

"The ability to make stand-alone business decisions about the Alienware brand and product portfolio will be the key to our continued success," said Gonzalez.

"You're not going to see Alienware logos show up on Dell products and vice versa. Our Web site is not going to change, and the majority of our business practices will stay the same," Gonzalez's statement later noted.

Shares of Dell were recently up 2 cents to $30.43 in extended trading.