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Interview with Velocity Micro CEO Randy Copeland

Interview with Velocity Micro CEO Randy Copeland

Written by Charles Husemann on 6/16/2006 for PC  
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Written off year after year, the PC Gaming market is actually starting to pick up some steam this year.  You only have to look at this year’s E3 to see that PC Gaming is on the rebound.  With titles like Battlefield 2142, Crysis, Quake Wars, Spore, and Supreme Commander and Microsoft refocusing their Gaming for Windows effort things are starting to look up.

In order to play these games you have to have a decent gaming rig in order to push every pixel and trick out every triangle and that’s where the specialty PC Gaming companies come into play.  One of the up and comers in that market is Velocity Micro and we recently had the chance to talk to Randy Copeland the CEO of Velocity Micro about the origins of the company, what he thinks of the marketplace, and where he things the PC Gaming market is going.  Here’s the transcript of that interview.

GamingNexus: Velocity started out building high end PC's for CAD applications, why did you expand into the gaming market? 
Simple, I started a business in the kitchen cabinet design business back in the early nineties, selling kitchen cabinets to distributors, dealers, and wholesalers and back in the early nineties there were a lot of people still using pencil and paper to draw kitchens out and using a typewriter to do the quote and the billing.  So as a means of being more productive and selling more kitchen cabinets I started offering PC’s and showing people what Quickbooks and what a kitchen CAD program could do.  It was something that I enjoyed doing and it was kind of an excuse I could tell my wife that I needed to build these computers because I’m selling cabinets and it is part of my job.  Everybody I know who’s built PC’s knows how much fun it is to build them and it was a great way to get into it.  As time went on so many of the things that went into performance tuning a PC for CAD are exactly the same for gaming. 

I was playing one of the Need for Speed games back in the day and a home theatre store in Richmond, Virginia asked me to build a PC that they could use to hook up to a 96” high resolution projection screen and really crank up the video quality and create and immersive experience, particularly with Need for Speed, so you could sit there in a chair and have this huge screen in front of you. And it just became something that I enjoyed doing.  And having it on such a beautiful display gave me more reason to really push the graphics  So I can began to playing  more with overclocking the video and because it was something that I really enjoyed doing, just trying to squeeze that last little bit of performance out.

GamingNexus: I remember having to tweak all the setting to get Wing Commander IV, having to play around with the config.sys and autoexec.bat files to get that last bit of performance out of the system.
Back then I was also overclocking the processor and running a program to help cool the CPU and running the tool to help keep the CPU cool because Windows 98 wouldn’t issue the stop function for the CPU.  So I was able to overclock the CPU dramatically along with the video.  This was back in the voodoo days when we were running the first generation of SLI.  It just became something where I wanted to see what I could do.  As an enthusiast I was always reading Maximum PC and Boot and all the gaming magazines and I wanted to see what I could do compared to those guys.  As I started adding employees to build the CAD workstations, guess what they were doing at lunch?

GamingNexus: Playing Games?
They were gaming.  Those guys, my system builders, were into it and it became a natural progression.  The first magazine we were able to get a review in was Maximum PC, which was in 2001.  They were looking for an all around PC but it had to be strong in Gaming.  I guess the long winded answer is that we got into it because it was something that people like to write about.  But as a gamer it was something that I got a lot of personal pleasure out of tuning and tweaking the units.

GamingNexus: Which product line drives the majority of your business (gaming, home theatre, corporate)?
We do more gaming systems than anything.  We’ll talk about Best Buy in a minute but they certainly skew that line a bit as everything well they buy from us is gaming oriented.  We still do a tremendous workstation business.  PC Magazine also picked us as the best mainstream PC of the year a couple of years ago for a $999 PC.  So we are actually really strong in the mainstream industry.  If you can call $999 a mainstream PC, I think it is the high end of the entry level PC business. 

We kind of segment our customers and we have different people who manage our PC Gaming platforms, our home and office PC platforms, and somebody who manages our workstations and server platforms.  Each of those guys really tailors the same general core components and tailors it more to the user need of that customer.  Every one of those is a profit center for us, and each of them is important to us because we think the value we add in service, support, quality components, and experience transfers between all of them.  We get the most traction and the most press coverage for our gaming systems because there are more people writing about gaming systems than there are people writing about $999 systems or CAD workstations. 

GamingNexus: With the PC gaming market so crowded (Dell/Alienware, Voodoo PC, Falcon Northwest, Monarch, etc) and with new companies like HP coming into the market how do you think Velocity differentiate itself from their competitors?
I think the reason we’ve had such tremendous success is because I’ve looked through the market and come up with the right mix.  Falcon and Voodoo--no question they build great PC’s, they use the same components we do they have the same meticulous care and craftsmanship that we do.  But I also tried to look and find a little more value for my customers.  I’m very focused on finding value for my customers.  Falcon and Voodoo want to be the Ferrari and Lamborghini of the PC gaming space. I want to be the BMW or the Mercedes, which means that I’ve got fairly exotic and high end systems like those guys do, but I also have the BMW 3 series and we have more mainstream systems. 

We do a lot more volume than those guys, which gives us manufacturing efficiencies.  For example, the chassis we use are custom built by Lian Li, but it’s not from the ground up a Velocity Micro design.  It’s a platform that Lian Li was already making and we went in and tailored it.  We put in bigger, quieter fans better air ventilation, better filtration, and kind of made it our own but didn’t have to re-invent the wheel.  We buy it by containers.  Some weeks we get a container, sometimes it is every other week. But we are doing a tremendous amount of volume and we don’t have to put a fancy paint job on it because it’s an already beautiful aluminum case.  All through our purchasing process we find a lot of value there.  We run a very tight ship, a very lean operation, we don’t have a lot of fluff or a lot of fat and everybody has to do a lot of jobs here.  We do all of those things with the thought of creating a better value for our customers. 

If you look back over the years, a lot of the PC Magazine reviews have said it really well.  We had a $5400 PC that won and Editor’s choice award over Falcon and Voodoo and in that review they said “Call us Crazy for calling the $5400 PC a value but when you compare it to the $7000 system from the other guys it really is a great bargain” and that’s really where we want to try and stay.  We want to be a good value in the ultra high end space.

GamingNexus:  Is most of your manufacturing then done in the United States or do you outsource some of it?
No, 100% of everything is done right here in this building in Richmond Virginia.  We have a fully integrated facility and in three weeks we’ll be moving to a newer, much larger facility here in Richmond that is 34,000 square feet.  It’s going to be state of the art everything.  We’ll still do the assembly process as opposed to assembly line, which means that we build one system at a time by one system builder.  So it’s the same way the really high end boutique guys do it. 

There’s one other thing that I forgot to mention about the differentiation area, and that’s our service and support.  Because we are a little bit larger than these other guys (although we still aren’t a multinational OEM), we’ve dedicated and continue to throw resources into our technical support.  All of our tech support is 24/7 and is all done in this building here in Richmond, Virginia by my employees who all have previously worked on our production floor.  So in order to work in our technical support area you have to have been a production guy on our production floor first.  It gives us a tremendous advantage. Our hold times are very short because it’s something that I’m committed to.  And when you get on the phone with someone, you’re talking to someone who’s built the PC you’re talking about and really knows what they are talking about. It so dramatically changes the tech support experience.  It’s basically an extra set of dedication to our customer that really sets us apart.

GamingNexus:  So there’s nobody reading a script out of a database?
No, there aren’t any scripts of any kind other than to say “Thank you for calling Velocity Micro.Hhow can I help you”.

GamingNexus: With the clock speed race between Intel and AMD winding down, where do you see the innovation in PC performance coming from? 
I still think we have a long way to go in terms of PC performance as far as I’m concerned.  The clock race per se is winding down but I don’t think the performance race is going to end any time soon at all.  You know Conroe is coming out in the next few months and the performance on it is tremendous.  AMD is not sitting still and they are coming up with new systems that can certainly at least crunch the benchmarks better and I think it’s going to take a while for things to level out again.  You have things like the AGEIA processor, the physics processor, things like SLI and Quad-SLI.  RAM technology is getting better and there’s a lot more RAM going into systems today.  By the end of next week we will exclusively sell DDR2 memory.  The clock still continues to be important from a performance standpoint and then it goes back to the other things.  You’ve got Blu Ray coming out, you’ve got other new optical technologies coming that are competing.  You’ve got graphical technologies that are constantly getting better.  Another big important factor is the software.  We are getting better and better software, which is going to require more from our systems.  More cores, more GPU’s, so I don’t see the PC as finished yet and I see much more improvement coming over the next few years.

GamingNexus: Do you sell more Intel or AMD systems or is it a fairly even split?
At the moment we about 80% AMD and 20% Intel.  About two years ago it was reversed and we were 80% Intel and 20% AMD.  My expectation is that we’ll move back to at least 50/50 by the end of this summer.

GamingNexus: One of the big stories in the PC gaming world was Dell’s purchase of Alienware.  What was your initial reaction when you heard the news?  How do you think the acquisition impacts Velocity?
It was major news for us, and it clears the way for us to become the new number one in the boutique space, especially in terms of volume.  I think it was a great move for them to partner up, and I don’t bash either of them for the decision.  But it does change the way people see Alienware and the way people see Dell, too.  It also changes the way people see Velocity.  Since that merger was announced, how many national retailers have called us and how many venture capitalists and angel investors, media, have called.  The focus/spotlight on us has just been a ten fold increase because basically the Alienware space is going away and being absorbed into just a little blip on the Dell radar screen.  So people are coming to us.  Or sales have increased dramatically, and like I said those retailers are looking for a way to compete against this juggernaut that Dell is becoming, and we are the clear choice to offer them an easy solution.

GamingNexus: You recently signed a deal with Best Buy to provide custom built PC's that will be sold in stores and at Best Buy.com.  How did this deal come about?  Did you approach them or did they come to you? 
It started last summer/spring, we were in talks with another major national retailer.  Best Buy caught wind that we were talking to them and called us and said “Look, we’d like to place PO’s by Friday, we’ll meet and terms and conditions you need”.  They wanted to try us and see how well we could do in the retail space.  Best Buy was looking to continue to make sure they were viewed as an authority in the PC space.  The (Dell) XPS systems had been coming on strong, they had had success with Alienware but they discontinued that program for reasons that are between the two of them.  So they were looking for a new alternative to reclaim some of the high end space that felt they weren’t really tailoring to.   They are very customer focused and their customers were saying that they wanted a better gaming PC than was on the shelf.  So they came looking for us, they called us and met every term and condition…everything we asked for they agreed to right away.  We mentioned that we were not going to cheapen our product, we were not going to cheapen our service, we were not going to cheapen our support or anything else about our product and they said,  “You are absolutely right.  We don’t want a watered down Velocity Micro. We want the good stuff that customers are coming to you for anyway.” 

So that was really the last thing that I needed to hear, and since then we are now in sixty-some Best Buy stores with two SKU’s in each of those stores.  They are Buzz categories where we are today.  We are currently capped out in capacity and simply can not make more PC’s for them until we get moved out.  We’re at kind of a standing still point right now, but the Best Buy vision is that they want to be able to offer a premium PC experience to customers in as many stores as possible.  As we continue to grow our relationship with them they are going to continue to take us into new markets and new categories.  They feel that their customers are looking for premium experience and not just in gaming.  Business customers could benefit from a hand built PC with a genuine Intel motherboard, Corsair RAM, and the rest of that good stuff. These are the kind of things that multinational corporations are not good at doing. 

It was just a synergy because we were looking for a way to translate our computer case and the touch the feel and the quality out to people because we had people saying all the time that the pictures on your website are great but I really want to get  my hands on them and is there a retail place or store where I can go to touch and feel and see one of your PC’s.  So it gave us a national spotlight where people in major markets can find a Best Buy store somewhere near them and can go and feel and touch and see what your product is because.  I don’t know if you’ve ever seen one of our PC’s or touched it but when you swing open the door of our LX case you really get an appreciation.  It’s a really heavy, thick aluminum door and it really gives you a sense of the quality throughout the case.  The door alone weighs several pounds because it is so massive.  It’s a slick industrial design, it’s not plasticky.  It’s not thematic like an alien head, it’s a classic, tasteful design that really pulled off well.  There’s a good fit and finish, and it’s a good opportunity for us to give customers a hands on experience and for Best Buy to give their customers something that they were asking for.

One last thing about the Best Buy deal is that the PC enthusiasts know us, but the mainstream customer who’s been shopping at Best Buy is not a customer who we’ve been reaching out to.  We don’t advertise on TV and we’re not in the mainstream press and not in the mainstream advertising market, so it’s a great way for customers who’ve never been exposed to an enthusiast PC to get a chance to find out about us.

GamingNexus: As you ramp up capacity are you going to start expanding to more Best Buy stores around the country?
Yes, exactly.

GamingNexus: When you go to Best Buy to purchase a Velocity System, are you going to buy something that’s already in the store or is that just serve as an entry point to Velocity’s website or some other ordering process?
At the moment there are sixty some odd stores that have two units on display and on the shelf for you two walk out with today.  Some of these stores have a third, higher end unit that has a FX60 in it, but most of them just have the two SKU’s.  You can go to BestBuy.com additionally and they have those two units plus the third higher end SKU. But they are on the shelf and on display and then walk out the door with one or you can go to BestBuy.com and click and it ships to you the next day.  Then there’s the BestBuy.com component.  In the computer section of all 800 Best Buy stores is a kiosk where you can go and configure a Velocity Micro PC and it ships from our factory to your door.  Same thing with BestBuy.com, where you can go to BestBuy.com and custom configure any computer that we offer and it’s custom built the same way as if you had come directly to VelocityMicro.com and it ships out to you with the same normal lead times and the pricing is identical between both.  Again it’s just another opportunity to reach into a segment of the market where we are not particularly active today. 

GamingNexus: Are both of these units desktop PCs?
Yes, both are desktop PC’s.  One is a $1699 SKU and the other is a $1999 SKU,

GamingNexus: Are you seeing any kind trends in terms of a shift from desktops to laptops?
Yes and no. We still do a healthy laptop business, but the laptop business for a smaller company like us is much more difficult today, at least it has been in the past anyway.  The international OEM’s who make the barebones laptops, their order quantities per month are higher than we were able to meet.  So we kind of were like Voodoo and Falcon and virtually everyone else out there.  Buying different barebones shells and then configuring and tuning them and making them our own.  And that becomes tough just because you have the same product as a lot of other people.  And you have to be more careful because the only things we have to add in the past have been our tech support, our value, and we do performance tuning on the laptops.  It hasn’t been a knock your socks off product in terms of industry leading design or anything. 

Going forward we are custom designing our laptops because we finally have a vehicle to get us to the minimum order quantities to deal directly with these typically Taiwanese laptop manufacturers.  So we will be rolling out a series of designed-by-me notebooks that hit the specs we want, the dimensions, the size, the graphics, the CPU and those things will start tricking out over the summer months.  It’s been one of those things where it’s easier for us to differentiate and compete against the multinationals on the desktop side rather than it has been on the laptop side.

GamingNexus: One of the bigger software releases this year is Microsoft Vista which is currently slated for release in sometime in late January/early February of 2007.  What kind of impact are you expecting to see?  Do you expect to see a massive rush to upgrade PC’s?
Yes, we do expect there to be some, particularily in the mainstream PC space, a huge upgrade cycle with the graphic interface being more three dimensional.  We think that it is going to push people to refresh their PC’s.  Windows XP has been out for a long time and a lot of people who bought XP early are going to be the same people who want to get Vista early.  Vista is not going to be a particularly easy upgrade compared to just buying a new PC, so we expect there to be a major refresh cycle.  Because of the strength we’ve developed over the last few years we think that we are a better alternative than we have in the past. We’re expecting it to be a huge uptick in business for us.  I’m looking forward to it and I wish that they would go ahead and get it done so we can put a stake in the ground and say OK here’s the launch date.

GamingNexus: Have you had a chance to check out the Vista Beta 2 yet?
Yes, I did as a matter of fact.  I just installed it on a system yesterday.  It’s not a tremendous change over Beta 1.  Some of the stuff we are still looking for is the super high end graphics drivers and those things we are still having issues with those things.  It’s encouraging to see the progress that they are making.  I think it’s going to be a tremendous reason for people to upgrade just because it is so slick and so cool.  The GUI just looks so much better and the same thing goes for Office 2007. I know in the gaming space we don’t like to talk about Microsoft Office, but Office 2007 just blows me away.  The interface is so much different and I think it’s going to be a good combination because a lot of us have gaming PC’s that we accidentally put Excel on as well.  I think the combination is really going to push a refresh cycle. 

GamingNexus: The rumor mill is abuzz with rumors that Microsoft might miss the January/February launch window, would this have much of a negative impact on Velocity?
Well, it’s not going to be good. It’s certainly not going to help us in any way shape or form.  I understand the reasons why.  I know some of the big multinational OEM’s are worried about left over inventories.  The big multinationals typically build up large inventories for the retail channel and then they’ve got to get rid of those things in January, right after Christmas is over and I think those guys as much as anything are pushing the move back of Vista because they want to get rid of their inventories before Vista comes out.  Otherwise they are going to have a bunch of lame duck PC’s in January that they had a hard enough time selling during the Christmas season in the first place and now they are legacy product all of a sudden.  So I think that’s one of the biggest reasons and that’s with no knowledge, that’s purely my speculation.  For us, we don’t carry a lot of inventory and Best Buy doesn’t carry a lot of inventory beyond any forecasts.  Like I said it’s not going to help but I don’t think it is going to stop our sales either.  I think there are people who get it and there are people who are depending on whatever Microsoft’s offer is.  Either 60 or 90 day upgrade opportunity if you buy a PC with Windows XP on it. 60 or 90 days before launch you’ll have the upgrade path.  So I think that’s going to mitigate a lot of it.

GamingNexus: Did you get a chance to hit E3 this year?
Absolutely, we had a huge event at the House of Blues with Best Buy and had thousands of people stop by.  I got the chance to get killed by Fatal1ty.  We had a bunch of PC’s setup there in the VIP area.  We gave away a bunch of PC’s to celebrity’s and basketball players.  I did get to visit the show as well.  E3 for Velocity is not as huge of a show because we’re not really trying to sell our products to the industry.  E3 as an industry event is great for media exposure but other than that you’re trying to sell your wares to the people walking the floor and for us we are not in a position today where we can support any more retailers.  We’re not in a position where we can really be actively looking for more distribution channels.  So it was more an opportunity to find cool stuff.  This year was the first year I got to actually walk the floor with Best Buy’s PC buying team, which was very cool.  It was interesting to see the things that they thought were cool and get their feedback on the things that I thought were cool.  Like every year it was a tremendous event and I wish it was easier to find the cool stuff mixed in with all the crap and the BS.  I wish the booth babes were a little hotter, I was a little disappointed to see them tone them down this year but that’s how it goes. 

GamingNexus: We’ll have to agree to disagree on that one because it’s always hard to get from A to B because as soon as a booth babe walks into a corridor you have a gaggle of geeks flocking around them.  We had an incidence where we had a guy trapped in one part of West Hall because of the Paris Hilton event. Getting back on track what did you find at the show that you thought was cool?
I’m always looking for the next big game.  The games I’m playing today are not the games that I wish I were playing.  I’ve got a nine year old son and he and I are some pretty heavy duty gaming but its in stuff that it’s OK for a nine year old to play.  Oddly enough, I started talking about Need for Speed at the beginning of the interview and he and I are playing Need for Speed:Most Wanted right now and playing a lot of it.  I’ve got a 60” Sony LCD display that we are racing on.  The games that I’d like to be playing for example, I was a big Far Cry for a while, F.E.A.R.  I got to see Battlefield 2142, which is something that I was very excited about as I’m a big Battlefield fan. .  Battlefield is a great game, a lot like Need for Speed, in that you can just walk in and start playing right now.  It’s not so drawn out that it takes you ten minutes to get immersed into the game.  Battlefield 2142 was gorgeous, I got to play it at our event as some of the software vendors like EA demo’d their stuff at the Best Buy show.  I also got to play Half Life 2:Episode One and that’s where Fata1ity just beat the crap out of me.  But it was great to get whacked by Fatal!ty.

GamingNexus: What do you think of Microsoft’s new Gaming for Windows initiative? 
I think it’s important and it’s healthy and it’s beneficial for Velocity Micro for more people to game.  I don’t care if it’s on your cellphone, PSP, or whatever it is the more people gaming the better it is for us.  The more attention that can be brought to personal entertainment including gaming, the better for us.  It’s just like AMD Live! or the Intel Viiv initiative, the more people can do to put personal entertainment in their lives helps us because the last thing I want to see happen it to see the PC or any of these other things become just tools.  I want people to continue to push the technology to entertain themselves and make their lives better.  Anytime anybody is playing a game of any kind I think it is good for our industry.

GamingNexus: Velocity recently signed a deal with Ageia card.  I wanted to get your impressions of the card and the technology and when do you think it’s really going to take off?
We were not a first-day launch partner with Ageia.  When Dell launched their Renegade XPS system a few months back they made some big news about the Agiea card. We decided not to launch it on that day because we were still waiting to see exactly how things were going to shake out, so we did launch it at E3.  If you’ve seen demos of the technology and what it can do I think it really is a lot of fun.  The suspension of disbelief is the holy grail for me in the PC gaming space.  It’s like watching a movie, you want to be so sucked into it and it really consumes you and you forget everything and you can kind of escape into it and enjoy it.  Gaming is the same way, when you have a super big monitor running at a super high resolution and you shoot a tank and 300 parts go flying  into the air instead of ten.  I think it does add another layer of realism and creates a better suspension of disbelief.  The flames act more natural, smoke acts more natural.  I think there’s a lot of work to do on the software side.  Even some of the games that are supporting it like Ghost Recon.  It still doesn’t really take advantage of all the cool things this processor can do.  But I think there is enough traction and enough excitement about it that it’s going to push game developers to come up with something new for it.  What’s still waiting to be seen is what the video manufactures are going to do, what’s nVidia going to do, what is ATI going to do [Note this was recorded before ATI announced their hardware solution]. 

There are other issues from the hardware perspective.  The AGEIA card is PCI only right now.  Building a high end PC with SLI you really only have one available PCI in most modern motherboards.  Do you put an Ageia card in that slot or do you put a Sound Blaster Audigy or Xfi card in that slot?  That kind of stuff is going to have to work its way out before Ageia really becomes a checkbox that every system is going to have.  

 

We’d like to thank Randy for taking the time out of his day (and on a Friday afternoon no less) to talk to us about his company as well as Jamie for helping to coordinate the interview.

* The product in this article was sent to us by the developer/company.

Interview with Velocity Micro CEO Randy Copeland Interview with Velocity Micro CEO Randy Copeland Interview with Velocity Micro CEO Randy Copeland Interview with Velocity Micro CEO Randy Copeland Interview with Velocity Micro CEO Randy Copeland Interview with Velocity Micro CEO Randy Copeland Interview with Velocity Micro CEO Randy Copeland

About Author

Hi, my name is Charles Husemann and I've been gaming for longer than I care to admit. For me it's always been about competing and a burning off stress. It started off simply enough with Choplifter and Lode Runner on the Apple //e, then it was the curse of Tank and Yars Revenge on the 2600. The addiction subsided somewhat until I went to college where dramatic decreases in my GPA could be traced to the release of X:Com and Doom. I was a Microsoft Xbox MVP from 2009 to 2014.  I currently own stock in Microsoft, AMD, and nVidia.
 

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