Have your voodoo pins ready? HP announced they acquired Voodoo PC.

Mergers & Acquisitions are fun affairs. After exhausting the low-end PC market, the big brands decided that they might pursue the high end gaming space (driven by performance cpu’s, motherboards, and graphics cards). Dell acquired Alienware earlier this summer. HP decided they needed to match Dell and looked around and plucked out Voodoo PC.

Gaming is showing to be a large and very rapidly growing market. Those kids (and adults) playing on TV gaming consoles are growing up and want something more. While those gaming appliances are nice and are morphing into low end computers (from memory the Xbox360 has something like an Intel 750Mhz cpu and hard drives), the hard core gamers want impressive equipment. There are gaming tournaments, and gaming centers where you can go and rent time to play on-line (and people in Korea dieing in their seats at one of these places from extended hours gaming without food or drink or sleep). Serious gamers also are willing to spend lots of money for the latest equipment.

The automotive companies did a similar tactic. Chrysler brought out the Dodge Viper halo car in the early 1990’s to reinvigorate their teams and product development, then Chrysler merged with Daimler-Benz to improve cachet and sell yet more vehicles.

The down side is the standard statistic is 70% of all Mergers & Acquisitions (M&A) are unraveled within five years. Lots of big press at the announced M&A about synergies. Then five years later more big press about the divestiture producing big savings and allowing the divested company to stand on it’s own without corporate governance bureaucracy and paying for their share of overhead/R& D (of course the stock price of the parent company goes up both times…).

Freewheeling employees hungry to be the underdogs that outshine the corporate conglomerates had found themselves being the corporate guys they despised, or chafe at the corporate impositions on their desires. Customers who went with a small boutique outfit considered them as “sold out” and lost from the original ideals of the old brand had never returned. Corporate marketing people had urged lower price point placement “just tone down the specs on Brand B and paint them a different color so we can have a “value offering” to “X-Mart-Buy-Retailer” for their promotional season. Then there were the constant Quarterly Sales and Earnings numbers to announce beating and what used to be a nimble small company had found itself suddenly trapped – so setting it free greatly expands their earnings potential. And so it goes.

The owners of Voodoo PC did a smart move with their sale to HP (Voodoo PC did a lot of targeted dating, HP’s press release). As long as they diversify their investment gains from the sale (let loose of HP stocks/options at their earliest window) they will do very well for themselves.

However, the winners will really be consumers. Pricing and Performance all the way up and down the computer market will see touches of improvements, HP to tweak their own products, and competitors to match them.

In the automotive arena pricing out small cars can reveal more capabilities about a manufacturer than tearing apart any mid to up level offering ever can, there just is no margin for error. The engineering has to be tighter and more creative there – like making the same piece of metal perform two or more functions. So I do this time to time with the computer market too. Pricing out a low-end HP desktop and laptop recently it was interesting to see how much more costly a similarly performing Dell machine was priced, this was straight off both competitor’s web sites and without the benefit of a special “sales coupon” one or the other offers from time to time. So HP may have figured out how to beat Dell at the cost game – and getting attached to Voodoo PC only enhances their high-end offerings.

It will be interesting to see what develops next in the computer markets. What will Gateway do? Or Lenovo, who acquired IBM’s computer business? Then there is Apple… but they are more likely to continue to acquire music & video and other “software” entertainment than gaming. How many other small boutique computer manufacturers out there are now rushing out their own road shows? Never a dull moment!

Cheers!

After a long summer of high gasoline prices and constant news about the SUV world ending the stations are selling almost 30% lower than the weeks leading up to Labor Day. News programs are attributing it to the end of the summer driving season (possible if we are at capacity supply/demand-wise). But I think there is more going on.We have a lot of elections up this fall. With less of an energy pressure then incumbents will find it easier to stay. This certainly will be an important driver, but not the most important.Ethanol (E85) from corn and cellulose discussions are important. General Motors has the most forceful marketing push here, aided by the other local automotive manufacturers. The rough targets I have seen put E85 economic switch-over attractive if gasoline stays above the $3/gallon price point.

The announced new Gulf of Mexico oil field reserve find is probably the greatest contributor to the oil problem. A major reserve, though very deep and difficult (expensive) to obtain for $2-$3 per gallon gas. It’s very attainable above $3 per gallon though – and what the existing oil suppliers are worried about.

Existing oil producers learned a lesson in the 1970’s. They found that the US market (the largest oil consumers on the globe) started finding alternatives to big cars, uninsulated homes, and power hungry appliances. Not wanting to drive the US market to figure out further conservation and extraction methods, the existing world oil suppliers have found ways to increase supply and cut prices. They will continue to drive price spikes that scare the general consumer but follow those spikes with relatively inexpensive pricing periods that scare any oil company executive against putting up money for the next oil field supply expansion.

Here are a few recent comments I found (#2 chosen for its passion and humor). #1,
#2.

The consumer has another weapon to fight high energy costs – continue to think like the end of oil is near and pursue conservation and alternative energy methods. We won’t be the first to go this route Sweden (Oil) has already decided to eliminate oil imports by 2020. European countries in general have added high fuel taxes to artificially inflate fuel prices (politically difficult here) and naturally encourage their respective populations to avoid excessive consumption. Worried about energy costs and fueling terrorism? Keep your sights on the horizon and figure out how to save energy at home and in business. This may get you started..something I came across and may pick up for my house soon (Meter)

Cheers!