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Technology Stocks : 3DFX
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To: Pierre-X who wrote (4785)6/27/1998 9:45:00 AM
From: Michael G. Potter  Read Replies (2) of 16960
 
I used to live in a beach-burb of L.A. (in the South Bay) as well and had a job with high travel so I saw computer stores all over the country. The L.A. area is not typical, it has a large number of PC companies and it seems to get shipments from Asia well before the rest of the country does. There also is a large choice of retailers to go to for computer equipment. Most other places in the country only have one or two large stores, the L.A. area has tons.

What that means is that each of these stores orders in the hot items. Larger stores like Fry's (if you haven't been to a Fry's, you don't know what you're missing) tend to get hardware first and then sell it too the early adaptors. The rest of the stores then get their stock and eventually there is saturation and you get stocked shelves and steady sales vs. boom sales with stock-outs.

The initial stocking period is good for the board makers because they get a bunch of large orders to put products on the shelves. In the long run, the steady sales are what counts. If sales slow down (as you seem to think they are), then the retail stores cancel orders and sell of their shelves. The board makers then cancel orders for chipsets and 3dfx gets hit. Even with good store management, it takes a while before the oem gets hit so I'm hoping that the current quarter will not be hit too hard.

What worries me the most about this quarter's release is not the results for the past quarter, but the outlook for the rest of the year. If they have good numbers but say "sales are slowing" or something to that effect then the stock could go down even with good results released.

Michael
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