Zeus, I guess Greek Gods don't need to worry about Intel ;-)
Unfortunately, we mere mortals do. The threat of Intel (and many other companies/partnerships) clamoring for the next generation multimedia processor market is real and will continued to be reflected in the price of S3's stock until proven otherwise. Unfortunately what you and I believe doesn't matter, its what the people that buy shares in 100K blocks believe.
The analogy with USR is flawed. Intel does have the capabaility to potentially change this industry, just as it did with the PCI chip-set and the motherboard business. The move to Klamath and a Intel/Lockheed/CHPS Auburn chipset builtin to an Intel Motherboard in Q4/97 is a distinct threat to S3, TRID and any other company that derives all its revenue from 2 chips sold to a bunch of OEMs.
Of course S3 management knows this, and will try and respond with their own Klamath/AGP/Virge follow-on product. They will also try to diversify with SonicVibes, Plato, DVD, and software company "investments" to hedge this threat. None of this diversification will likely add up to 5 cents worth of EPS in 97.
I admire your David-like optimism as you stare down Goliath and proclaim:
" Who knows? What happens if S3 starts making their own microprocessor with video,audio and modem capablities built in?
Its just as much a possibilty as Intel overtaking S3."
Better post this on the Intel thread so people can start selling their shares. Or maybe S3 will just buy Intel out? ;-)
Looking at the chart, volume, news and reaction to the 1st Qtr conf call, I'm forced to semi-agree with Kieth. S3 will be firmly stuck in a trading range <= 20*(Trailing EPS) = 19 through at least the 2nd qtr. The only upside breakout could be based on a blow-out (20%) or higher EPS surprise vs consensus. As earnings come in as expected(hopefully), the trading range could creep up as the Trailing EPS improves. However this could be offset as today's percieved threats actually become real.
Q4 97 is make or break time for S3, by then the reality of Intel and other competitive threats to S3's core business will be more well known. In addition, this will also be a time when we'll know if the SonicVibes chip has the ability to be a new Trio or Virge-like product for S3. This will likely be the time when we will see if S3(and its investors) emerge as winners or losers in this very risky, volatile, but interesting industry.
In the meantime, while S3 continues to bounce off 16, I don't believe for a second that the 16 support could not be broken with any major market correction like it did last July. If you don't think companies in this indistry can sell for a PE of 10 go check out CHPS.
In the meantime, either
1. Sit tight and have faith ($26 by Q1 98 if S3 wins)
2. Sit tight and sell calls to hedge
3. Sell into any rallies at $19 / buy at $16
Hey George - Where's that new Thread??? S3(Damien's Favorite Stock?)
S3 (Sight, Sound and Seventeen Dollars a share in 97)
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