By Karen-Janine Cohen

Two buddies from Miami experience a
meteoric rise when they boldly go where
few floridians have gone before

Try as he might, about once a year Alex Aguila, co-founder of high-performance computer maker Alienware Corp. can’t resist teasing his mother about her long-ago admonition that playing video games would not get him anywhere.
It turned out she was only partly right. It wasn’t playing games, but making the computers to run those games that earned Aguila, 39, and his partner Nelson Gonzalez, 41, stunning success. In May 2006 the pair, friends since their childhood in Hialeah, a suburb of Miami, sold their ultra hip 10-year-old company to computer giant Dell for an undisclosed sum.

Since its launch a decade ago, Alienware has earned a loyal following of computer aficionados, particularly gamers. The machines are favored not just for their speed and sophistication, but for their stylish designs and logo based on the common conception of an otherworldly face. The alien face is incorporated into the chassis of its desktops and laptops, giving the machines a retro-deco look.
Now Gonzalez and Aguila, who agreed to keep running the company post-sale, are guiding Alienware in its next phase: expanding its gaming and nongaming clientele while figuring out how to reap the benefits of being part of a giant corporation.
Gonzalez, an avid gamer, started the company after becoming proficient at building computers for his own use and for the use of game-bedazzled friends. He asked friend and fellow enthusiast Aguila to help him start the firm and oversee the operational side.
It wasn’t too hard a sell, notes Aguila, who says that at the time he was in “a nowhere job,” with an unsympathetic boss.
Aguila and Gonzalez are of Cuban-American heritage, though both were born in the United States. They met as children when Gonzalez, as Aguila tells it, was playing some kind of war game with a group of other kids, saw Aguila and tossed him a toy “bomb,” that immediately blew up. “That set the tone for the rest of the relationship,” he jokes.
They named the company Alienware because they liked the kind of conspiracy-laced science fiction epitomized by television shows like The X-Files.
With an initial $13,000 investment, they figured they would have to eventually sell about 24 machines per month to make money. The computers’ popularity took them by surprise. “We had never imagined there were so many gamers like us,” Gonzalez says.
Indeed, those playing such fare as World of Warcraft helped propel 2006 sales to an estimated $225 million, according to figures Alienware gave earlier this year before its deal with Dell. From a two-person enterprise, Alienware has grown into a company that has 860 employees, with 200 of those hired within the last year.
The popularity of Alienware is based on its performance, a critical consideration for gamers. Today’s typical games, says Gonzalez, increasingly contain graphics that push the limits of hardware. And game buyers want to get their money’s worth, with programs running at the highest resolution and “liquid smooth.”
Consumers are willing to pay a premium for the company’s custom-tailored machines, which typically cost between $2,700 and $3,500. What they get is a product from a company that won a Shoppers’ Choice Award for the “Best Performance Desktop by Computer Shopper”; had its Alienware Area-51 ranked among “The 25 Greatest PCs of All Time” by PC World; and also has received PC Magazine’s Reader’s Choice Award.
Despite the company’s success, Alienware has had growing pains—problems that the deal with Dell should help solve. For example, computer delivery used to take about 45 days. That’s now down to between one and two weeks, says Aguila, who notes that 70 percent of customer complaints have involved how long it took for their system to arrive. As the lag has decreased, customer satisfaction has risen.
“When you have a long lead time it creates all sorts of problems,” Gonzalez says. Dell’s offer came at the right time for the firm.
The deal will give Alienware needed resources to broaden its product line with more highly tuned boutique products and to expand to a wider, world-wide market.
“We were at a crossroads,” says Gonzalez. “It was either go public or partner with someone.”
Being added to the Dell organization will help in managing Alienware’s supply chain efficiency, helping the company get the right amount and kind of components delivered at the right time, Gonzalez and Aguila say. Being part of Dell is a big advantage in vendor negotiations and allows Alienware to piggyback on some Dell contracts. However, both Gonzalez, chief executive officer, and Aguila, president and chief operating officer, emphasize that Dell is taking a strictly hands-off approach, and the partners continue to make key decisions.
“We do what we feel is right for the company,” Aguila says.
In a press release at the time of the sale, Dell Chairman Michael Dell said that Alienware’s systems will be a complement to Dell’s own line of high-performance computers and that the company also brings “tremendous brand appeal with consumers and creative business professionals.”
Or as Aguila puts it, Dell recognized there is “a secret sauce in this company.”
Alienware’s deal with Dell comes at a key time for computer gaming. According to a February 2006 report by Forrester Research, a Cambridge, Massachusetts-based technology and market research company, the U.S. video game market represented $10.5 billion in 2005 with almost half of U.S. households either playing games on their PCs or having dedicated gaming consoles, such as Sony’s PlayStations. According to the report, the PC is the most popular online gaming platform and by 2011, PC gaming will grow to find a spot in 44 percent of North American households, compared to 39 percent in 2004.
Still, the report cautioned, video gaming is in a kind of “midlife slowdown,” with 43 percent of young gamers saying that they play fewer video games than they did two years ago. However, the report said, one area that is growing is online gaming. (One attraction of online games is that in some cases, people are able to play one another in real time).
Dell isn’t the only giant partnering with a high-performance computer maker. In October, Hewlett-Packard acquired VoodooPC, a Calgary, Alberta-based company that also makes computers designed for gamers.
Yet Alienware may be able to stay ahead of the pack, says Bruce Pechman, a longtime customer who also reviews technology for KTLA’s morning show in Los Angeles and Good Morning San Diego, another television show. Alienware, he says, has always been at the forefront of giving gaming customers what they want—powerful machines with great video capabilities at reasonable prices.
Pechman bought his first Alienware system in 1998, and has purchased five altogether. He was looking for a system that really catered to gamers, and Alienware, he says, was one of the first. “It wasn’t like today, with lots of boutique gaming builders.”
While he acknowledges that customer loyalty is crucial, it has limits, even among game enthusiasts.
“To remain viable you have to keep coming up with new technologies and bring new things to the table,” Pechman says. The competition is getting more intense as people increasingly have access to new technologies that might make one machine more attractive than another, he adds. At the same time, manufacturers are limited by how much even the most enthusiastic gamer will be willing to pay for a machine.
Pechman notes that innovation needn’t involve hardware but can be something like the jet-black chassis of some Alienware models. “It has such a high appeal, especially to the 18-to-34 gaming demographic.”
Gonzalez is well aware of the need to innovate and knows it can be done in various ways.
“Research and development have always been part of Alienware,” says Gonzalez, adding that the company learned in its early years to be cost-effective, in other words, innovative without spending “millions and millions” of dollars.
One example: using software to simultaneously harness the power of two video cards. Another recent feature is chassis lights that change color when an e-mail arrives—a boon to those who don’t want their game interrupted by other e-mail notification methods.
And Alienware has also, when appropriate, collaborated with other manufacturers in order to offer its customers something new and different. That’s what it did to develop its computers’ liquid cooling system.
At the same time, Alienware is diversifying its customer base. One increasingly important client is the U.S. government. Government contracts now account for up to 10 percent of sales and the company has a special division devoted to them.
“Before, we didn’t have any focus on it at all,” Gonzalez says. The connection started when agencies, interested in running complicated simulations and planning applications, began calling Alienware, he says. “This could potentially become a big part of our business,” Gonzalez adds.
Alienware is mulling over whether or not to expand its retail presence past a kiosk in Miami’s Dadeland Mall. However, that would mean investment in retail infrastructure, as well as having the kind of inventory that retailers depend upon.
“We are still picking out areas we want to expand into,” he says. “It’s not so much to drive revenues, but to increase brand awareness.”
But, Gonzalez says, he isn’t worried about the competition.
“I think we are the ones driving the competition,” he says. “I look at it as trying to outdo ourselves every single time and make sure we are pushing the envelope.”

A Decade of Alienware Innovation

1996: alienware is born
Nelson Gonzalez, CEO, and Alex Aguila, COO and president, found Alienware, aiming for the gaming market.

1998: Advancing
Introduction of the 3DFX/NVIDIA combo solution, providing all-around compatibility with both Direct3D and Glide games. Unveiling of sound cards for high-performance gaming PCs, providing support for four speakers and three-dimensional sound to complement the 3D gaming experience.

1999: the game
Wicked3D, a division of Megabyte, announces that Alienware would be the first company to license its Parallel Graphics Configuration (PGC) Technology. This allows two 3dfx Interactive Voodoo3 2000 PCI cards to be combined in one system and delivers 55 frames per second without overclocking. Formation of Alienware Technology, a programming division in charge of developing software and utilities geared to the gaming segment.

2001: Branching
out
Alienware signs a contract to allow Best Buy to begin offering Alienware systems retail. The first models introduced are the Area 51
2.0GHz and 1.6GHz systems in Space
Black, Conspiracy Blue and Saucer Silver.

2002: Service meets entertainment
Introduction of AlienAutopsy, a technical support service that
provides staff with a detailed incident reports and allows them to
diagnose problems remotely and fix them quickly. Launch of Alienware Media Center PCs, enabling consumers to watch television, surf the Internet, watch movies, listen to music, view photos and play games conveniently. This includes features such as TV control functions that allow consumers to record, pause, fast-forward, and rewind live television, regardless of signal type, satellite, cable or antenna. Launch of the Area-51m,
billed as the first notebook powerful enough for gaming.

2003: revamp, redesign
Introduction of a tower case design with styling that includes AlienEyes. The alien “eyes” function as air inlets for two fans to cool the system. AlienEyes are available in blue, green and red. Release of AlienIceT, a video cooling system that maximizes airflow to keep system components running efficiently and prevents crashes. It’s soon followed by AlienAdrenalineT, the only program of its type to support multiple graphics cards from multiple vendors simultaneously. Redesign of the Area-51m, named the best overall mobile gaming system by Tech TV and recognized by journalists and gaming enthusiasts for cutting-edge technology, innovative design and superior customer service.

2004: A big boom
Introduction of proprietary technology offering a dual processor system with the feature of supporting two PCI-Express video cards in a single PC. Unveiling of Silent Liquid Cooling, a liquid coupled with gold-plated, copper coolers to keep the heat generated by internal hardware components in check. Launch of the budget-friendly Bot system. Initiation of 4.0 GHZ processors on Area-51 ALX systems. Inauguration of dual-graphics technology, enabling two graphics cards to work together to improve graphics performance. Introduction of the DHS 2 system, which combines the features of nearly every home entertainment device into one system. The DHS 2 later wins CNET’s Next Big Thing award.

2005: diversifying products
Development of systems with dual-core processors, providing faster response times and enhanced performance when running more than one data-intensive application simultaneously. Unveiling of the Aurora: Star Wars Edition, the first-ever officially licensed Star Wars PC. The outer cases are available in two versions: the Dark Side and the Light Side. Release of a new line of Hivemind rack servers for Alienware’s growing base of corporate clients who need resource management, data warehouse applications, Web hosting and more. Upgrade of a new
generation of highly advanced Sentia and Area-51 notebooks. Introduction of Ozma 7
headphones with S-LogicTM surround-sound technology, which go on to win a product award from Maximum PC. Diversification of product line with the introduction of the
CE-IV MP3 player and HUB docking system.

2006: A Dell deal
Alienware becomes the first manufacturer to offer a 160GB hard drive, the largest hard drive capacity available on a mobile system. Alienware becomes a wholly-owned subsidiary of Dell, continuing its own brand, design, sales and marketing, and support. Terms of the deal are not disclosed.