updated 9/29/2006 8:50:26 AM ET 2006-09-29T12:50:26

Hewlett-Packard Co. said Thursday it has agreed to buy high-end gaming PC maker Voodoo Computers Inc., giving the computer and printer company access to an elite group of hardcore hobbyists willing to shell out several thousand dollars for turbocharged customizable machines.

Palo Alto-based HP did not release terms of the deal, which was announced after the market closed as a congressional panel finished grilling Chief Executive Mark Hurd and other HP insiders over the boardroom spying scandal that has claimed three board members and three top HP employees.

HP's deal with Voodoo is part of a larger trend of big PC makers snapping up high-end gaming equipment companies to capture a lucrative market with higher growth rates and fatter profit margins, said Roger L. Kay, president of Endpoint Technologies Associates Inc.

In March, Round Rock, Texas-based Dell Inc., the world's largest computer maker, announced it was buying Alienware Corp., whose pricey PCs are acclaimed by video gamers for their fast performance and sleek looks.

In HP's case, it gets to tap into Voodoo's fiercely loyal customer base but also retains the expertise of celebrity co-owners Rahul and Ravi Sood, will stay on at HP in key technology and strategy roles.  HP plans to make Voodoo the centerpiece of a new gaming unit within its Personal Systems Group division.

"It's a real coup for HP — it's a jewel in their crown," Kay said.  "But the biggest winner is Voodoo.  They get the payday, the financial backing, the access to R&D and the supply chain," which can dramatically drive down Voodoo's component costs and boost margins.

The acquisition is expected to close by November 2006, HP said.  It said it will keep the Canadian company's brand name and distribution model.

HP's wanted to expand its product line beyond equipment for game developers and servers for online games, and believes the technological advances will influence its other product lines, said Phil McKinney, chief technology officer for HP's personal systems group.

"We're in the gaming space, but were in it behind the scenes," he said.  "The gaming industry pushes the very fringe of performance, and we think those technologies do have a trickle effect."

The Sood brothers said in interviews it was a difficult decision to sell the company but they want to use their new access to HP's multibillion-dollar R&D budget to develop technologies to "redefine the PC."

"We can only innovate to a certain level," Rahul Sood said.  "Now we have access to patents coming out of the labs every day. It's like we have our own university campus."

Randy Copeland, the founder and chief executive of Velocity Micro Inc., another maker of high-end gaming machines, said big PC makers are increasingly looking to meld the boutique shops' "cool factor" into their own product stables.

"It validates our category as a place where the battleground is happening," he said.  "Everybody's getting into it. It's tapping into the energy in the gaming space — people want to be associated with it."

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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