HP is ready to play in the gaming market

The company's HP Labs research center is developing technology that could be incorporated into next-generation personal computers that play interactive video games designed for the broadband era. By doing so, HP thinks it can compete against a surge in popularity of console-style games such as Microsoft Corp.'s Xbox, Sony Corp.'s PlayStation and Nintendo Co. Ltd.'s Wii.

At an event that drew HP officials, technology partners and reporters, the company showed off prototypes of gaming technologies, including gaming PCs from VoodooPC, which HP acquired in the fourth quarter of 2006. The gaming unit within HP's Technology Solutions Group is called "Game On."

The prototypes include computers with curved screens so someone playing a race car game can see the track they're driving on ahead and to their sides and a touch-screen computer built into a coffee table so players can sit on all sides and participate. HP also played a video in which a teenage boy walks through a big city with his handheld game player. He points the device at a portion of the city's skyline, the device scans the outline of the buildings in view and creates a game scene from that image.

While impressive, HP has a steep hill to climb. Sales of gaming consoles grew 33 percent in 2006 while sales of gaming PCs grew by only 1 percent, according to the retail sales tracking firm NPD Group Inc. While HP doesn't expect consumers to camp outside retail stores overnight to buy an HP, as they for the Xbox 360 and PlayStation 3 when they launched, there are other more promising signs of market potential.

Sales of gaming software that runs on PCs reached US$6 billion globally in 2006 and are forecast to hit $12 billion by 2010, said Rick Wickham, director of games for Windows for Microsoft, citing figures from IDC.

Rahul Sood, chief technology officer of HP's global gaming business unit, who came over from VoodooPC, sees HP offering a premium line of gaming PCs priced higher than its current line of HP and Compaq branded PCs, but lower than VoodooPC's custom-made models, which can sell for $8,000.

Asked specifically if HP plans to soon introduce a line of PCs such as that, Shane Robison, executive vice president and HP's chief strategy technology officer, said, "I am not allowed to go there."

HP is not the first PC maker to try to branch out into high-end gaming PCs. Dell Inc. acquired Alienware Corp. in March 2006, for an undisclosed amount. But HP appears to be taking advantage of its new relationship with VoodooPC more quickly.

HP's move into gaming could be a "game-changing" move, said Rob Enderle, lead analyst with technology research firm The Enderle Group. HP could try selling high-margin gaming PCs to escape from the low-margin PC market it competes in with every other PC maker. But it could also be a risky move.

"The buyer may say they don't want one and that is the risk when you make a game changer. You make a guess at where
the market is going and you get there first," Enderle said. "If you guess wrong you're there all by yourself."