I think the concern may be that Diamond might not be able to survive if
they can not make money at their current profit margin level. And if Dimd
goes belly up, they arent ordering any products from S3.
Personally, I feel that Dimd has lost major market shares in the graphics
board area. STBI boards are coming stock on dell and gateway. Most of the
boards in the mid to lower end Dells are s2 empowered. All of gateways are
s3 driven. Notice that Dell just changed their advertisement. S3 USEd
to be on 3 or 4 of the ten stock models. Now, they are on 7 of the ten that
I recently saw in their new advertising campaign.
Also, remember that as recently as two years ago, graphics were powered by
graphics boards or real cheap mother board connections. The graphics
cards were considered the only way to get high quality video. Now, s3
chips are dominant directly on motherboards. Almost all of the Dell
networking computers we have in here have s3 chips right on motherboard.
I think s3's and market's shift to chips right on the motherboard has
killed diamond. For those still looking for graphics card addons, STBI
and matrox have done the best. S3 is on lots of STBI cars as well as
many other cards in the industry.
As for commodity pricing, if graphic chips are becoming commodities, I
think s3 will be the best suited to be profitable. Besides their experience,
their size and revenues will allow them to meet manufacturing capacity
and efficiencies needed to be profitable in a commodity enviroment.
Many chip makers have revenues of 14 - 20 million for quarter and some
for even the year. If chips are becoming commodities, unless they
can get revenues sufficient to become mass producers, these companies
will fall by the wayside once a new tech comes out. or they will
be bought out by one of the big companies, like S3, Matrox or ATI.
Clearly, the market is not unaware of the size of customer that DIMD
is to S3. Nonetheless, I think that given DIMDs last quarter annoucement
and poor earnings and this new release, they are becoming a smaller
customer to s3 each quater. Afterall, this is one reason s3 will
make .10 vs.firstanticipated .32 for q2.
Go with the leaders, market share holders , who can be profitable
in a tightly competitive enviroment.
I like s3.
Steve |
