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Technology Stocks : Diamond Multimedia

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To: Jay Fisk who wrote (3607)	6/19/1998 12:27:00 AM
From: Kashish King	Read Replies (1) of 4679

Well, TDFX has a forward looking PE of 50 if their sales level off and their margins hold at current levels. That's a far cry from 8. How these companies hope to survive long-term escapes me. They are trapped in this perpetual upgrade cycle and the technology is such that commodity chips are more than adequate, even for power users. That leaves the hard-core gamers and graphics workstation markets which are highly competitive in their own right. I don't see margins increasing with performance; I see performance increasing just to maintain margins. Having said that, DIMD still sells tonz-o-stuff and what's a company's value if it isn't revenues? I mean, why is your stock worth anything at all? Book value aside, because company X would love to absorb company Y's revenue stream. Even if company Y is losing money, company X can leverage their existing infrastructure and make a profit where Y could not. Currently, TDFX' market cap is 300% of annual revenues where as DIMD's is only 50%. I would say from a buyout perspective DIMD looks safer than TDFX.

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