Diamond Multimedia (DIMD) Message Board

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Technology Stocks : Diamond Multimedia (DIMD)

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To: Kashish King who wrote (50)	9/14/1996 2:42:00 PM
From: Jonathan Quick	of 99

"OK, let's assume Diamond's driver problems for Windows '95 and even Windows NT are substantial. Let's assume further that they do not raise a finger to change their quality assurance or development process to address this. Even under those conditions, the drivers will be fixed incrementally until the bug count approaches zero. I don't see intially buggy drivers as a major threat to their top or bottom line at this time. Improvements in the process will alleviate this further. I don't like it, but I'm not overly concerned about it." If Diamond existed in a vacuum, there wouldn't be a problem. Competitors have created a competitive advantage over Diamond by developing stable Win 95 drivers several months ahead of Diamond for video accelerators using identical acceleration technologies. Why should consumers tolerate the incremental process of revision you suggest when competitors offer a stable set of drivers right out of the starting gate? "I don't want to get too technical here but despite the problems I see Diamond Multimedia filling sales channels to the tune of 1/2 a billion dollars this year (they are on track for that) and well positioned for the future as any of the competition is. Moreover, 3D technology is quickly migrating from entertainment software to tools and applications and Diamond stands to cash in on this phenomenon." In arriving at your $500 million dollar figure, did you consider the impact of competing products based around alternative processors? For example, have you considered boards scheduled to be released in December utilizing the Rendition Verite processor or the 3D Labs Permedia processor? Have you fully considered the impact of the Chromatic MPACT? More importantly, have you fully accounted for the dilution of the market for Virge-based accelerators that has taken place through S3's direct sales to system manufacturers? Have you also considered the impact of other add-in manufacturers producing identical products based upon the same S3 chipsets that are used throughout Diamond's product line? Methinks $500 million is a trifle overly optimistic under such conditions. Jonathan

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