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Playing The Gaming PC Market

System builders are still finding that the gaming PC market has plenty of headroom as power users refresh their systems.

Businesses may be slow to adopt Microsoft's new Windows Vista operating system, but gamers have no such reluctance. Custom-system builders say gaming sales are booming—and Vista is helping drive the market.

The market, of course, has been hot for some time. For evidence, there is Dell's acquisition of Alienware last year followed by Hewlett-Packard's purchase of Voodoo Computers. The specter of the top two PC makers snapping up the two hottest brands in gaming may have led some to wonder whether this niche may be getting a little too hot for smaller competitors.

But no market may be better suited for custom-built systems than gaming, where brand often takes a backseat to cool, and with the launch of Vista, custom-system builders are continuing to develop their own places in the market.

AVADirect is one of those companies looking to take a bite out of the multibillion-dollar pie. The Twinsburg, Ohio-based system builder recently opened a new warehouse to give it space to expand its custom gaming PC business. Each of its seven technicians spends about two days on a custom machine, and AVADirect reports that it is selling between 50 and 60 custom gaming machines each month.

""We take every single computer we sell pretty personally," said Alex Sonis, president of AVADirect. Customers can order customized computers, complete with colored lights or fans, with as much memory as they want. Sonis thinks this is what will help take the $8 million system builder to the next level.

"We give them something to make it custom, completely custom both lookwise and performancewise," he said. "If they have something they want to have in their computer, we can do it for them. With us there are no limits, and I think that's the niche of our company."

Right now, 80 percent of AVADirect's sales are desktop machines, with the other 20 percent coming from laptops and servers. Sixty percent of the company's orders come through its Web site. Customers can choose between Microsoft's Windows XP and Vista operating systems, but "right now most people pick Vista because it's the new thing," Sonis said.

Falcon Northwest, a longtime gaming system builder in Medford, Ore., has been seeing 20 percent to 30 percent growth annually and it expects Vista to open up new sales opportunities this year, said Brad Berdelman, general manager. "Obviously, the Vista launch has been pretty big with enthusiasts of gaming," Berdelman said. "It's really going to gain some steam. It's really going to push the market for us. ... For the first part of this year, people have been pretty hesitant about Vista, but I think it's going to be helpful for growth going forward."

Key to that, he said, is Microsoft's Games for Windows initiative, which certifies games for compatibility and performance. Vista also comes with a utility that rates computer performance on a scale of 1 to 6, which helps resellers demonstrate how much horsepower their systems really have.

In addition to Vista, customers are asking for more memory. While the average system ships with 2 Gbytes of RAM, customers are frequently requesting 4-Gbyte and sometimes 8-Gbyte systems, Berdelman said.

"The hardware is always driving it. Most of the people who are gamers are enthusiasts at heart so they enjoy the launches of things like quad-core processors. Any time we have a refresh like this, it keeps the enthusiast interested. They look to upgrade their systems or purchase new ones," he said.

Next: Gaming PCs hold their own vs. notebooks

Berdelman also notes that while in most markets desktops have been losing share to notebooks, that has not been true in the gaming market. "It's one of the few remaining strong sectors of non-laptop hardware sales," he said.

In addition to customizing the inside of its gaming PCs, Falcon Northwest offers painting, and about a quarter of its customers order specific designs like "World of Warcraft" characters emblazoned on their cases. "We don't pigeonhole them into specific colors, either. We'll match their 1972 Pinto if they want or a Lamborghini Diablo. ... We'll match any custom car color that's available. We do custom air-brushing," Berdelman said.

The allure of the custom gaming market has hit even solution providers like GST in Brea, Calif. After 20 years of building systems for education and business customers, GST decided to enter the gaming market this year when it saw an opening on the local level. The company put together focus groups to find out what gamers wanted and began building machines six months ago.

GST expects sales of about 600 customized PCs per month, said Stephen Monteros, general manager. "We really see it growing because more people are online. More people are gaming and they want something customizable," he said. "If we keep pace with the market, you're looking at 30 percent to 40 percent growth per year."

GST saw the gaming PC opportunity as a local play, offering Southern California a regional player that would be more easily accessible than companies like Voodoo and Alienware. "There is no very good custom gaming PC [maker] in Southern California, and SoCal is one of the largest gaming communities in the U.S.," said Baron Lee, assistant director of the War Machine project at GST. "We feel like we're trying to build a community—build a better relationship for the end user."

Seattle-based system builder Puget Custom Computers has also built itself a niche in the gaming market, selling custom gaming PCs for an average of $2,500, although some systems can run up to $10,000, said Jon Bach, the company's president.

Bach said gamers are looking for the hottest, newest technologies, which these days means getting Direct X10 graphics cards. "With Vista being the only way to get Direct X10, when it first came out at the end of January we immediately moved to a 50/50 sales split. Soon after, especially as more of the buzz about Direct X10 got out, I'd say anyone who's a serious gamer is going with Windows Vista," Bach said.

Vista is definitely having a positive impact on Velocity Micro, Richmond, Va., which grew more than 200 percent last year and expects to exceed that growth rate this year, according to CEO Randy Copeland.

He said sales were soft in December and January right before the launch. Velocity Micro began selling Vista at midnight on the launch day and had its second highest day of sales ever. "A lot of people waited to buy Vista, and it's been a huge success for us," he said. "We absolutely love Vista."

But Vista isn't the only thing that has been helping Velocity Micro, which Copeland said now has sales in the mid-eight figures. The company also sells preconfigured machines through Best Buy retail outlets. "Because we compete really aggressively in all of the higher-end SKU spaces it gives us a lot of growth opportunities," he said.

At the end of the day, being able to offer premium custom-built systems and high-touch service is what is required in the gaming market, system builders say. And that isn't something that is easy for tier-one brands to deliver to a mass market.

"There are lots of people looking for a new brand that hasn't cut back, hasn't outsourced and hasn't walked away from the ultimate PC experience," Copeland said.

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