Viglen-MS PC deal raises ire, suspicion

A coup for Viglen but bad news for the big boys in consumer PCs.
Written by Martin Veitch, Contributor

That was the verdict of the UK PC community today on the surprise deal that means the UK firm's new HomePro four-PC line will be co-branded by Microsoft and sold through Dixons stores. Dixons, which has stores under several names, is the dominant supplier of PCs in the retail channel in the UK; Viglen has previously sold almost exclusively through the direct channel.

The move is believed to be the first of its kind in a major market, although Microsoft has long been rumoured to have been interested in getting more top-line coverage on PC brands. The software Gargantua has slowly moved to embrace hardware over the years by putting its name to mice, sound card kits, joysticks, keyboards and other peripheral equipment. In October, it is expanded to expand its WebTV Networks subsidiary by setting up shop in the UK.

The branding exercise caused much irritation among other PC vendors. "How can there be a level playing field if Microsoft goes around giving one PC vendor special treatment?" asked one vendor who requested anonymity.

Others said the move would only be useful in retail where Microsoft's huge brand awareness counts strongest among consumers. "We don't really see the value-add ourselves," said Demetre Cheras, systems marketing manager at Elonex, another UK PC vendor which sells mostly to business and almost exclusively direct. "What's the special relationship that no-one else has? We're quite mystified. It doesn't make sense. It's a software company moving into hardware."

Although Viglen stressed that the HomePro systems support the Microsoft PC 97 standard specification and will be able to run Windows 98 when the operating system arrives, cynics noted that these hardly made the company a rarity.

The deal is clearly a neat one for Viglen, a successful direct seller of PCs in the UK but hardly a challenger to the likes of Compaq, IBM or Dell in terms of volume or revenues. Analysts said that could be the reason why it got the thumbs up from Redmond.

"For Microsoft, this is a trial run," said Robert Cashman, research analyst at UK IT market researcher Romtec. "Viglen gets more from a branding exercise with Microsoft than anyone else could have given them but I wouldn't think any of the major vendors would have done this for fear of diluting their brand."

Cashman also floated an intriguing and not-quite impossible prospect: "Who knows, maybe they'll get into the PC business. They have to keep building the business and that means getting into other areas."

Of course, such an action would immediately raise the attention of regulatory bodies but some observers believe there could still be a back door in through tighter relationships with selected PC makers.

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