I'm starting a new forum - it's time for you to join!

Many of the readers of this blog (and the articles I write for CPU and Custom PC) consist of Wall Street regulars, enthusiasts of technology, start-up owners, and early adopters. The forum we are creating is a great place to share ideas and concepts with like minded individuals such as yourself. I am starting this as a pilot and if it`s successful it will continue.

You may visit this group to discuss anything related to hi-tech companies, to pitch new ideas and technologies, and to learn more about the companies you’re investing in. I imagine it will be slow to start, but hopefully we'll build a new and interesting community. I am hoping to learn about new technologies along the way, you never know what might come out of it. In the meantime please excuse the work in progress, there will be many modifications along the way - especially during the beginning.

I am heading to Dubai and India for about five weeks, so I thought I would launch just before I left. I'll monitor it along the way - and I'll try and appoint some moderators as well.

So you're all welcome to join 328KPH.com Rahul Sood's official Tech Entrepreneur & Investor Forum.

Rahul's Predictions for 007

It’s been awhile since I have written an industry update so I thought I would end 2006 with some 2007 predictions. Keep in mind; these predictions are simply open predictions based on my own personal hypothesis – nothing is written in stone of course, but as per my usual style I leave my opinions in the open.

Samsung or Hitachi should/will acquire Western Digital: I think Western Digital, being the #2 hard drive manufacturer in the world (maybe a distant number 2, but still number 2) is a prime target for acquisition. I ran the theory by Charlie from the Inquirer sometime early last year and he wrote about it without the complete explaination. Perhaps I will expand on it later - but for now here are a few points;

I think it would benefit Samsung or Hitachi to acquire Western Digital because they could really use the brand penetration that Western Digital has garnered in the enthusiast PC space. I have written before about the “halo effect” that’s driven by the enthusiast community, so there’s no reason to explain the reason for this theory. WD is also doing pretty well in emerging markets and emerging vertical markets. As far as I understand Samsung has a goal to be #2 in the hard drive space by year end 2007 – that said the only way they can do this is to make an acquisition or grow their storage business at an unbelievable rate. By the way, I think Western Digital drives are pretty awesome and even though Seagate owns a ton of I.P. Western Digital keeps coming up with new and innovative ideas. They helped turn a commodity into a “sexy product”. It should also be noted that I own Western Digital stock, although I own it because I believe in it – and this opinion is purely based on my beliefs.

NVIDIA will not be acquired by Intel, but...: Nvidia will work feverishly on a strategy to remain ahead of the curve in the mobile space. It’s unlikely that they will allow Intel to “acquire” them simply because the cultures are like fire and water. I think the *only* way and Intel + Nvidia marriage will work is if Jen-Hsun remains CEO of the entire entity and they do a reverse takeover of Intel. That’s not likely to occur, but if the shareholders of both companies feel it’s a good move then it’s a possibility.

It’s more likely than not that Nvidia will build their own solutions and ultimately there will be three huge companies competing for silicon real estate. Eventually we may even see AMD and Nvidia get even closer - or not. I think it depends on how Intel handles the situation.

AMD will see better days in the future: Intel’s sudden onslaught of technology caught AMD by surprise. There is no way that AMD expected Intel to come across with such aggressive technology so quickly. AMD needs to clean house, make changes soon. They need to get ATI integrated into the machine as quickly as possible. The sooner ATI and AMD “fuse” the sooner they will create new and innovative technologies that everyone needs. Margins will eventually go back up and revenues will be strong – but until then we’ll see AMD margins drop. I don’t think it’s a pretty situation for the short term – and I’m really looking on the horizon for AMD to do something spectacular again.

ATI should really be proud of the Nintendo WII as a marquee product. ...but unfortunately such products don't pay the bills, so ATI needs to aspire to clobber Nvidia one day. I'm optimistic that AMD management will help ATI go down the right path to performance.

Intel will open up on 11 cylinders: It looks like Intel is in the position to open up on 11 of 12 cylinders. Their products will use less power, and they will continue to perform favorably. Short-mid term for Intel looks fabulous - of course the AMD+ATI thing probably has them worried, but leave it to the engineers in Israel to come up with a solution and I think we're in for some more surprises. I think Intel will try to push more "Centrino/Viiv-like" standards to the market, we'll see how that works out for them. I believe they will cut some more heads from the company, and they should take a page out of Mark Hurd's book to become a more sales-driven organization.

Something is happening with Lexmark, what I have no clue: Lexmark is still on the climb. I wrote that I thought they would make a possible acquisition, but damned if I thought it would continue to go on a vertical climb before that happened. Does anyone know what happens when a company climbs too high based on rumours beyond a reasonable value for an acquisition? That’s not a rhetorical question either, if anyone knows please feel free to pipe in.

Dude! You’re getting a real gaming system: Wait and see. Good things take time, and we’re not prepared to launch things overnight. We’re bringing in some serious muscle to leave zero doubt that this acquisition was the best move both companies could ever make in the space.

Nintendo will sell more WII's than they could ever dream of: Try playing Madden on an XBOX 360 at 1080i, then play the same game on a WII at 480. Need I say more? There's clearly no comparison, and Nintendo figured out how to invoke deep emotions from console gamers. This is a category killer. Sony should be afraid, very afraid.

Apple should license OSX: If Microsoft Vista Ultimate is ~$400 and Apple OSX is $40 there is clearly an imbalance here. Wouldn't it be interesting if Apple opened up their OS to a select few manufacturers? I think so.

2007 Special Request: I would like to make a special request to both GPU and CPU semi-conductor companies out there.

Please keep power limitations at the top of your priority list! I can’t believe we’re approaching 1.2 kilowatt power supplies, it’s getting insane. These supplies are drawing as much power as the wall socket can handle. There are management at the top of certain companies that think customers in our space “could care less” about power, and this is not true at all.

Power is a very important consideration for enthusiasts! Noise, reliability, thermals, overclocking, it’s all part of the package. We aren’t interested in loud-ass PCs – and even scarier is when liquid cooling is becoming standard because we are left with little choice! I'm a believer in liquid cooling, in fact at one point I was a significant shareholder of Cool-It technology. I don't believe liquid cooling should be a forced standard -- it should be installed to enhance the overall experience/performance - and not to "cool the shit out of the hardware" because it needs a power station to operate.

That said, it’s likely that liquid cooling will become a necessity in the enthusiast space as long things continue down the current path.

The winner of this battle will be the company who eliminates that trend and continues to go down a lower power path. You’re just going to have to trust me on this. If you can take overall system power down while delivering similar or better performance than your competition at higher power then you’ll be more successful.

That’s my story and I’m sticking to it.

...and the next acquisition?

I don't know about you, but I think Lexmark is the next big target for acquisition. It seems to make sense, everyone wants to be HP, but it's probably not as easy as "partnering". I have been studying the printer market prior to the HP acquisition. HP owns 70%+ of the global printing market, and if our fearless leader of the Imaging Printer Group Vyomesh Joshi has his way that will only grow as time goes on.

Speaking of printers, the technologies coming out of labs related to Imaging and Printing go beyond insane. I am totally fascinated with what the guys are working on -- it's only going to get better.

So is Voodoo going to start offering printers on our website? It's hard to say at this point, there are a number of things we need to consider first including shipping logistics and what-not, but it's certainly not out of the question.

In any case, Lexmark looks like it could be scooped up soon, that's just a guess - but I think it's a pretty wild guess. If you can't be HP you might as well try by acquiring everyone/everything in site and seeing what sticks right?

I'm pretty sure I know who it is (if it is) - but I'll leave that up to "time will tell".

Getting Buy In From your Team is Money

It doesn’t matter whether you are the CEO of a Fortune 500 or the president of a tiny company, when you’re creating a new product line or merging with another company it’s very important that you have the backing and support of your team around you to make sure things are executed properly.

On the merger/acquisition side, one shouldn’t have to dig too deeply for reasons to go forward; management and cultural synergies should be obvious immediately. If they aren’t then you should probably go back to stage one and find another partner or idea. If you’re vision is cloudy and hard for people to understand – then you may have another problem – and quick decisions may lead to mediocrity.

There are a number of acquisitions that have taken place in our industry – and this year tech acquisitions are reaching new heights. When someone asks me to gauge the potential success and/or failure of such moves – and my quick answer is always to check with the employees. Although it seems quite unscientific, one should be able to examine the potential for success based on the employee reaction and cultural synergies.

I bring this up as we get to the official closing date of the HP Voodoo acquisition. I found out that everyone at Voodoo signed up almost immediately after receiving their offer letters from HP. That’s right, 100% of our employees signed up without hesitation.

Not only this, but we have ex-Voodoo employees knocking at the door to see if there is an opportunity for them to join back on the team. On the other side in Cupertino, I have received nothing but high praise about the deal in general – people are “high-fiving” me in the hallways as I pass. People at HP Labs are excited by the prospect of working with us, and it feels like home when I visit all the sites. This tells us that our strategy is validated by the very people who will be carrying it forward.

If you can’t draw out your strategy on a napkin for other people to understand then you better go back to the drawing board. I'm not suggesting that decisions by democracy always make sense, because they don't - but having the majority buy-in is money in the bank.

When you compare this to other mergers that have recently taken place in the industry it should be obvious which ones will be successful and which ones may face challenges.

I’d like to comment on the AMD + ATI merger because I feel it will be a hot topic of discussion now that it’s official. I will also comment on the rumors about Nvidia + Intel – which I believe are nothing more than rumors and very unlikely to come to fruition. I will be adding a second part to this blog in the near future.

In the meantime, things between HP and Voodoo couldn’t be better. The honeymoon will soon be over however - and it will be time to make good on our plans.

It's Official: What are the implications?

A number of weeks ago I speculated that Alienware would be acquired by Dell in a move to help revitalize Dell’s business (among other things). It turns out that they announced it earlier than I expected - by about a week.

Regardless of the situation, this is pretty big news with industry wide implications. There will certainly be shockwaves in the gaming industry judging by what seemed like 200 incoming phone calls that were fielded this afternoon at Voodoo.

Here are some random thoughts;

Implications to Dell:

• Dell now has another brand that they can plug into their engine.
• Dell has a new brand that they can scale and take to new markets around the world.
• It may give Dell a stronger negotiating position with their suppliers.

Short to Mid term Implications to AMD:

• Alienware, a soon to be subsidiary of Dell, is currently one the biggest swallowers of high end AMD Athlon 64 FX processors. This means Dell is technically a customer of AMD, and this is just the beginning.
• Dell may launch AMD based servers in the not too distant future.
• It’s likely that channel partners who are currently not engaged with AMD will be left confused and bewildered as their customers start making RFQ’s for systems with AMD based technology simply based on the influence that Dell has on the market.

Implications to Intel:

• It should be good news for Intel in the long term, that should be obvious.
  
• Intel will be in a stronger position than they currently are once their new parts come out.
• On the other hand, Dell could use this relationship to squeeze margins out of Intel.
  

Implications to others:

• The supply chain will change; Alienware will likely drop most of their channel suppliers and procure their products via Dell.
• Nvidia will certainly benefit immediately with their Quad SLI technology, nForce chipsets, SLI, and all the rest.
• When AM2 and Conroe come out it’s likely that ATi will also benefit in a big way because we are already seeing massive performance jumps from ATi’s previous generation to their current.
• I can’t speculate on the long term implications to the AW brand, only time will tell.
• Charlie at the Inquirer will wear the bunny suit decorated however we see fit. Anyone have any suggestions?
  

Implications to Voodoo and our other competitors:

• VoodooPC will continue to build high end luxury PCs including some new soon to be announced desktops. We will continue to evaluate new technologies as they come out – we’re certainly looking forward to both AMD’s new AM2 architecture and Intel Conroe.
• VoodooPC will launch a couple of new notebooks soon; we’re pretty excited about Intel Core Duo as well as AMD Turion 64 X2.
• There will be huge interest in the PC gaming space again. Dell has legitimized the gaming space, it’s clearly very important to them to be perceived as a leader in our space.
• The enthusiast companies like Voodoo will influence mainstream buying decisions more than ever.
• The smaller competitors in our space should also see a spike in business.
• Ten more companies will start painting their systems green and throwing neon lights in them only to call them gaming PCs. Eleven companies will shut their doors realizing that they don’t understand the gaming market.

Looks like I might have called it...

So after writing this article on the pending Alienware-Dell deal I received a ton of emails and comments. I didn’t realize it would be so controversial – after all this is just a blog and it’s not like I would write something unless I had good reason to believe in it.

It looks like I might be right on the money and this deal may be announced fairly soon.

There are many implications that will come out of this acquisition which I will get into later, but the bottom line is it looks like Charlie from the Inquirer will end up wearing the bunny suit.

Thank God for that.

Dellienware: Will Aliens get abducted?

UPDATE March 22, 2006: Looks like I was right.

I recently wrote a column for the upcoming issue of Custom PC Magazine. You’ll have to pick up a subscription to read it, as I said before this is among the best “hardware lifestyle” magazines in the world. Although Computer Power User, PC Gamer, and Maximum PC are also among my favorites, Custom PC is fantastic; the photography is good enough to eat, and the layouts are scrumptious.

The story is about Dell and the changes that I think they will go through this year. The column is called “The Bear Hath Awoken”, and the following is the “sequel” to the column.

Dell + Alienware = Dellienware. Is it possible? Yes, at least I think so. I won’t get too far into details as to why I believe this is going to happen, but I will offer some of my thoughts. Even though Dell has never been known to make acquisitions, times are changing and so is their brand positioning.

First we all know that Dell cannot risk losing their stronghold in the server space therefore a potential relationship with AMD is bound to occur. That still leaves the question of the consumer market.

With the recent Intel/Apple relationship it’s clear that 15% (or whatever) of the consumer space for Dell may not be enough. Apple is likely to go to 8% with the help of Intel over the next year or so. The PC gaming market is threatening Dell’s “perceived technology leadership” – and ultimately the consumer space. The Alienware brand is cooler than Dell, and perhaps a likely candidate for Dell to take over based on size alone.

These are just some observations;

1) Dell is not unlike a big bad bear that has been awoken from his hibernation.

2) Dell knows they need to grow, and they need to be perceived as a leading edge company.

3) Dell can’t crack the “cool” factor with the Dell brand.

4) I’m pretty sure if offered a check (cheque for my Canadian/U.K. brothers and sisters) the guys at AW may jump at the chance to cash it.

5) Dell could take on another brand and grow it as an individual brand separate from Dell – perhaps?

Why the potential for a Dellienware and not another?

Alienware is widely considered to be the volume leader in gaming, they have scale. To me scale isn’t as important as “customer experience”, but time will tell if I’m right. I have not for a second ever considered dumping our price in order to compete head to head with Dell like our competition has. I believe the Voodoo brand is all about the experience, and as a result we keep adding more value to our experience – and we will continue to do so regardless if this happens.

On the other hand I can't fault my competition for single handedly taking on a giant. Though I believe it changes their brand position I think they have had Dell in their crosshair for years.

I am not sure about the move for Dell, but I am sure that Steve Jobs is God according to Wall Street, Hollywood, and every mainstream publication – and I think Michael Dell wants to change that. I can think of better ways of changing it, but hey, what do I know? This is all pure speculation.

Whether I am right or wrong AMD is going to win – and Dell may likely come out a winner as well. Imagine what a deal like this does to change our landscape.

This year will certainly be an interesting one no doubt. Of course when I say “Dellienware” I am being facetious, but I believe an acquisition is on the horizon. I'm looking forward to the comments, I think this should make for an interesting topic.

This goes out to Charlie from the Inq: If this does indeed occur I still win and you’re wearing a bunny suit even if I have to throw you in it myself!