| Rahul Sood didn’t even bother to drop out of college. He just stopped going to class. It was 1991, and Canadians were on the verge of the PC revolution. Windows 3.0, with its user-friendly graphical user interface, had just been released, and the Microsoft operating system sparked sales of home computers that could be assembled from components. Prior to this, most computers, like those from Apple and IBM, were sold as complete prebuilt machines.
After graduating from Henry Wise Wood high school, Sood enrolled at Mount Royal College, but ended up building computers instead. On a $1,500 investment and an $85 newspaper ad, Voodoo Computers was born. In his first week, Sood sold eight computers, and a workstation contract a year later enabled him to buy a century-old house in downtown Calgary.
The house, on the corner of Centre Street and 13th Avenue, wasn’t in the best of neighbourhoods. "At that time it was really bad." Sood is on the phone in his Calgary office, reminiscing about those early days. "The place was boarded up and there were hookers standing on the street."
But he and his small staff renovated the house and started cleaning up the neighbourhood. "We got rid of all the needles in the bushes and gained the respect of the people around us and just asked the hookers kindly to stand on another corner."
Over the next 15 years, Voodoo Computers would grow to become one of the premier computer manufacturers, specializing in creating high-end, customized systems. Along with Miami’s Alienware and Medford, Oregon’s Falcon Northwest, Voodoo created and capitalized on the enthusiast computer segment, driven by hardcore users like video-game fanatics, who are constantly looking to upgrade their computer components in order to eke out better performance.
It was early in 2005 when Sood realized that Voodoo was nearing a ceiling. The companies who were manufacturing the components that Voodoo used in its computers wanted more volume from the company. "If we designed a fanless PC," he explains, "they wanted to be able to take that technology and open it up for anybody to buy."
Sood figured there were two options available. Either drop the price — and therefore quality — of Voodoo’s computers to be able to sell more units and satisfy the component manufacturers, or find a strategic partner.
"Our number one choice was HP," he admits, largely because "they were registering, at that time, something like 16 patents a day." But despite meeting with HP representatives that summer, Sood says that movement towards a possible deal was slow.
HP was in the midst of a rocky transition. Slumping sales and loss of market share to competitors such as Dell and Gateway led HP’s board of directors to force out chair and CEO Carly Fiorina. Mark Hurd stepped in as CEO and Patricia Dunn assumed the duties of chair.
In the meantime, Michael Dell came calling. Dell contacted Sood at home in November 2005 to talk about the gaming business in general, but also about the prospect of acquisition and partnering. The two exchanged a flurry of e-mails and in December, met face to face. "I decided that it didn’t make sense, working with them," says Sood, claiming that Dell didn’t grasp Voodoo’s strategy.
So he decided to turn back to HP, and took a chance by e-mailing Hurd directly. "Two days later we had a team of people calling us. Because Mark Hurd instantly got the strategy in a matter of a two-sentence e-mail."
Sood speaks very highly of Hurd, who is now CEO and chair at the Fortune 500 company. "When you look at HP compared to a year ago, look at their performance, you’ll understand why they’re performing so well. Mark Hurd is a genius."
As the negotiations were getting underway with HP, Sood predicted that Dell would acquire Alienware, one of Voodoo’s largest competitors in the custom computer market. "I knew Dell wanted to make an acquisition," said Sood. "But there were really only two companies that he could acquire that made sense, and I knew they weren’t going to acquire us." A month later, Sood’s prediction came true.
Hewlett Packard has been in the news lately, more as a result of a spying scandal involving the company’s board of directors and ex-chair Patricia Dunn. It’s been an embarrassment for an organization that has such a storied history in the personal computer industry, but the ruckus didn’t phase Sood one bit.
"This is a dream job for me," he says. His new position is chief technology officer for HP’s global gaming division. "Can you imagine walking into a lab where they spend $3.5 billion a year on R&D?"
The acquisition of Voodoo also makes sense for HP. Last spring the company launched a marketing campaign proclaiming "the computer is personal again," and Voodoo’s reputation for creating unique computer systems personalized to meet the needs — and desires — of users slots into that strategy.
Voodoo also gives HP access to the prize that is represented by hardcore gamers. "Gaming is a lucrative place to be," admits Sood. But gamers themselves are more valuable than consumers of hardware. "Gamers tend to refer 20 people, on average, to technology buys," he says, explaining that because of Voodoo’s commitment to gamers, "only 25 per cent of our customers are gamers. It’s kind of a neat dynamic. We’re dealing with radiologists, doctors, lawyers, celebrities, people with a lot of money."
The new business plan transcends gamers, though. Sood acknowledges that Voodoo computers are priced higher than those sold by HP, and that the volume of computers being sold is lower. "We do plan to fill in that gap without bringing the Voodoo brand downstream," he says, hinting that there will be a mid-level range of computers coming from the Voodoo/HP partnership.
And it will all be coming from Calgary, with HP’s blessing. "They wanted us to keep our DNA intact," says Sood. Not that anyone in Calgary has noticed. "I think in Calgary people don’t appreciate the high-tech business as much as they do the oil business," he reasons. But that may change as Voodoo ramps up its hiring. Since the acquisition, Voodoo has grown from a staff of 30 to 50, and Sood expects to add an additional 150 new employees by the end of the year.
"The reason for Voodoo’s success is because we’ve always been looking to change." The acquisition by HP and Voodoo’s new access to those resources means that Voodoo can continue to change and respond to the rapidly changing computer market, and competitors that are threatening.
Alienware, now part of Dell, also has access to deep pockets and has become the elite brand for the computer manufacturer. And then there’s Apple, which in the last five years has re-established itself as a force to be reckoned with. "Apple is definitely one of the companies we’re looking at closely," admits Sood.
Since Apple switched to Intel processors, users can install Windows operating systems, and use Apple’s sleek G5 computers for gaming. Not to mention the moves Apple CEO Steve Jobs has made in the consumer electronics industry with the iPod and forthcoming iPhone.
"I definitely see Apple getting more aggressive, but I can tell you that we’re not blind to what they are doing, we’re a more innovative company." Sood’s confidence is palpable. "Our product line that is coming out is pretty awesome. We think our competitors should be scared." |
Copyright ©2007 FFWD. All rights reserved.