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Interview: Falcon Northwest CEO Kelt Reeves on the HP-Voodoo PC deal

Interview: Falcon Northwest CEO Kelt Reeves on the HP-Voodoo PC deal

First Dell bought Alienware, then HP scooped up Voodoo PC. If those deals are bad news for Falcon Northwest, it's not because CEO Kelt Reeves isn't dedicated. Dude just answered our questions from his Hawaiian vacation. Maybe it's all that sun, but he doesn't sound too worried.

Were you surprised by HP's acquisition of Voodoo?

I don't know anyone who wasn't surprised. That said, with the Dell/Alienware deal as precedent, it was a logical fit from a business perspective. What was so surprising about it is that [Voodoo President and CTO] Rahul [Sood] has made a name for himself as a blogger by predicting other deals, such as the ATI/AMD buyout and Dell's aquisition of Alienware. The one he could've predicted with perfect accuracy was the one he was very good at keeping secret.

What do you think it means for the future of Falcon Northwest and the boutique PC market in general?

That's probably a more loaded question than either of us can imagine right now. This is definitely an "inflection point" for the entire PC market. It depends on how the two companies fit together. We found that as Alienware grew, they strayed further from the enthusiast/custom/boutique market. The Dell deal seems to have clinched that. It works out well for us because essentially we're serving two different markets. Alienware may be sleeping on a big bed of money these days, but it hasn't seemed to come at our expense...the net effect on us is neither Dell nor Alienware seems to be on our turf anymore, and strangely, their combined impact on us is less than it used to be with Alienware alone.

HP's aquisition of Voodoo PC seems to be structured much more effectively, and if it works, it could keep the rest of the boutique market on its toes. It appears HP understands that a boutique's real value isn't from volume, but as a proving ground for showing off new technologies and getting real-time enthusiast feedback. And most importantly, filtering enthusiast PC ideas to mainstream products quickly. Another Web site likened it to HP buying a Formula 1 team. In that sense, they could be very valuable to all of us enthusiasts by bringing enthusiast PC thinking to more mainstream customers.

Do you plan to capitalize on your new status as the best-known indie PC vendor?

I've received a lot of "what's it like to be the last one?" e-mails this week. While not technically true, I can see how a lot of people are viewing us that way. The enthusiast market perceives going mass market as "selling out." The very day Alienware went into Best Buy years ago we heard nothing from our clientele except "they sold out." A bit unfair on day one, but I guess it's just the price you pay for making ties with any big company. Falcon's not going to go taking out advertisements saying "Hey we're the last of the 'big 3' independents, so you should buy from us and stick it to The Man!" We're going to do what we've always done: provide hardware and services that are an alternative to the big PC makers.

Alienware has Michael Dell's checkbook; Voodoo has the keys to the HP R&D kingdom. How does Falcon plan to compete?

In theory they do, but I doubt it's that simple. Alienware has a sliver of Michael Dell's checkbook, and Michael Dell is using many more slivers to make his own gaming-focused XPS line. It must be maddening for Alienware's management, but they wouldn't be allowed to say so if it is. Voodoo may find HP already has a long list of its own projects, and Voodoo may not be as important to HP's $80 billion worldwide sales as it is to Canada's enthusiast community.

These trade-offs could be tough on a small company that's used to moving fast and not having to ask for budget approval on projects. But it would be foolish to suggest that having big company funding was on balance a disadvantage. I'm sure the funding will give them a competitive advantage. But Falcon has always fought the big guys; I've never seen being small as a disadvantage. On the contrary, being small means I make our decisions quickly, without politics, and with our clients a bigger priority than stockholders.

One speculation is that Gateway or another large vendor might come knocking on your door. Thoughts?

Obviously, the fit between a boutique and a volume player makes sense to a lot of people, including me. That said, it would be very hard for any bigger fish to swallow Falcon without destroying what it is that makes it special. We've passed up many opportunities to "go big" over the years. These opportunities may have made a lot of business sense, but I'd rather protect what Falcon Northwest is and who it serves.