Analyst opinion: Dell’s and Gateway’s gaming strategies compared

  • When I first started out covering PCs, Dell and Gateway were close rivals, neither was really considered much of a threat to IBM or HP, and, at least at that time, it looked like it was going to be a tight race.   Now, well over a decade later both firms have suffered setback, but are recovering and Dell’s progress has been vastly greater, probably because it has enjoyed a vastly more stable executive staff and related strategy.   

    In effect, Gateway suffered largely because its chairman didn’t give any of the interim CEOs enough time to fully execute a strategy and the constant direction changes hurt the company to a great extent. This was clearly demonstrated when one of Gateway’s ex-CEOs, Todd Bradley, took HP’s PC business and made it incredibly successful largely because he was given the authority and time he needed to execute. 

    Gateway is now stable and improving again and has recently brought out some of the most competitive, and best looking, laptops in the market (we mentioned them when we talked about Intel’s mobile product launch) and continues to have what is arguably some of the best OEM monitors in the segment, their 24” being their flagship.  On top of that, they are now taking gaming seriously and now offer a line of gaming desktop PCs. 

    For Dell, who began the decade as the market leader, an excessive focus on costs destroyed support quality, which, we have to remember, this quality had been a defining benefit for the company.  This resulted in Dell losing a substantial amount of customer loyalty and sales. It also resulted in the loss of the CEO Kevin Rollins and the return of Michael Dell as the CEO. On his return, Michael put the support organization into a recovery mode, reconnected with customers and did what no other big PC company had yet done, embraced desktop Linux (after indicating he would be willing to license the MacOS. )   
    Dell is improving as well, though it continues to take shots that resulted from some of the earlier mistakes; they actually bought a Gaming company, Alieware, and their XPS line often has put the market on notice that they are a serious player in the segment.  

    Let’s talk about the differences in the two companies’ approach to PC gaming.

    Dell: GM

    If we were to compare gaming PCs to sports cars and Dell to a car company, in many ways it would be like General Motors and the Corvette.  GM’s acquired companies, like Volvo and Saab, are relatively independent much like Alienware is, but GM’s internal flagship car is the Corvette with which it demonstrates it technical competence and economies of scale. 

    The Corvette is like a poor man’s Ferrari, it has most of the benefits of an exotic car (though it isn’t as exclusive) at a much more affordable price. Dell’s stunning XPS 720 H2C, which we covered extensively this week, is the match for almost any exotic gaming PC and a flagship for technologies ranging from active lighting to liquid cooling.  

    Like a Corvette, it isn’t as expensive as some of the true exotic PCs which can cost upwards of $20K but it can be optioned up to include almost any gaming technology available today including a physics processor and a Blu-ray drive.  

    Like the Corvette, it leads a line branded “ XPS” with special attributes.  Chevrolet has always had a sporting aspect to the brand though perhaps more focused on price than speed (with Pontiac being the premium sporting brand). The XPS line is both premium and sporting more like a cross between Cadillac and Pontiac at GM. But it is a distinctive line and, at least for the consumer market, is one that does a lot to define Dell much like Chevrolet often is seen as the defining product for GM.  

    Gateway:  Ford

    Gateway’s strategy is much different for gaming.  Similar to what Ford does with the Mustang, Gateway takes an existing line, pumps up the performance, and provides a unique result at a very reasonable price. Like the Shelby Mustangs, the product looks different but largely because of external cladding, and the real power is under the hood which, while not as elegant and the Corvette, has historically been in range.

    At the top of their line is the FX530XT, which is due for a refresh shortly; it uses a similar BTX design to the Dell though without the water cooling; it was one of the first to use the Intel quad-core Extreme processor and sport dual ATI Crossfire Cards (which for some reason have worked better for Vista Gaming so far this year).  

    As you can see from our review we loved this product it was well priced and provided a great experience.  For a lot less then the base Dell XPS H2C, you can get the Gateway box with all of the goodies including Gateway’s market leading 24” monitor, Logitech 2.1 speakers and a factory over-clocked processor. Unlike Dell, Gateway is, like HP, HD optical drive agnostic (which is interesting given Dell’s typical message about choice) and you can get Blu-ray and HD-DVD drives as options. Personally, if I’m paying this kind of money for a machine, I want to pick my options and, with HD, I’d probably either want both Blu-ray and HD-DVD or neither. 

    But the XT is the Shelby Mustang of the line which starts with the FX530B that, for under $800, provides a nice value much like the base Mustang does. So, the cost of entry into Gateways gaming line, like the cost of a low end Mustang, is very affordable and for many the resulting performance is still likely more than adequate.  

    Wrapping Up

    The XPS customer and the FX customer are clearly different buyers, much like the folks who buy Mustangs and the folks who buy Corvettes. Being successful in any segment is about building the products your target customer wants and both Dell and Gateway are doing that again. Who knows, at some point they may again look at each other as primary competitors. But for now I think both are focused a bit more on HP and we already covered the amazing things they are doing.  

    I’m looking forward to the fourth quarter: By then, we are likely to see the AMD systems based on their new quad-core in market and related refreshes from most of the vendors building gaming PCs. AMD is convinced what they have will blow Intel’s doors off and Intel is equally convinced that AMD is wrong.  Gaming is only getting hotter and that means more amazing systems are on the way.

    Rob Enderle is one of the last Inquiry Analysts.  Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them.  Currently he provides his services to most of the major technology and media companies.

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