Moving on, we asked how the current economic climate is affecting a company that resides very much in the premium end of its market. “I know it’s counter-intuitive but people are actually buying more of our products,” said Herkelman. “It seems that when they do buy they want to buy from companies with a good reputation and good warranties like us, EVGA and Sapphire.”
This is an interesting point. The assumption is that, as money gets tighter, people will be more likely to go for cut-price options. One explanation for what BFG is experiencing is that people will shop around and research more when they’re feeling less rich and so are more likely to fully appreciate any value-add more expensive products offer.
Herkelman also maintains the perceived value of his products by cherry-picking its retail partners. “Our priority in the channel is to help our channel partners to make money. This is why we’re quite selective about who sells our products.”
BFG also seems to be fully subscribed to the ‘halo effect’ theory, in which having a high performing, high profile product leads to increased sales of products lower down the price scale. “We have the fastest graphics card on the market,” said Herkelman. “H2OC is definitely a niche market but it gives you a stable overclock and is quieter. We’re selling quite a few – we already have back orders.”
Looking into the future, it appears that this may be one of the last times we’re discussing the GPU market in terms of NVIDIA versus AMD/ATI. Intel’s discrete graphics offering – codenamed Larrabee – is expected to make an appearance in 2009 and it will have the backing of a company that’s several times the size of AMD and NVIDIA added together.
“Next year we’re going to see a completely different competitive landscape and it will change how people buy graphics cards,” said Herkelman. He then indicated that there may be a greater emphasis on platforms – i.e. NVIDIA cards running on NVIDIA boards, etc.
To conclude, we suggested that Larrabee might put his, currently NVIDIA only, business in jeopardy. As you would expect, however, Herkelman thinks competitive GPU offerings have got their work cut out, warning: “A lot of companies have gone out of business trying to compete with NVIDIA on GPUs.”