3DFX Message Board - Msg: 5775755

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Technology Stocks : 3DFX

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To: Sun Tzu who wrote (7339)	9/17/1998 1:22:00 PM
From: Patrick Grinsell	Read Replies (1) of 16960

Share Buyback... I was vehemently opposed to this option initially as there are plenty of better things a small company can do with the cash. I think we all must admit that there is a price for everything, however. At a certain point the stock price will reach a level that will constitute the best of all available options. It's just plain economics. The Sega deal has been batted around at about 32 million. Let's say that 3dfx has about 135M in cash right now. By spending 75M of that, 3dfx would be able to buy half the number of shares outstanding and permanently double the EPS. Now imagine that 3dfx decides to blow all their cash and buy 90% of the shares outstanding. Do you realize that that would put our trailing 6 month earnings at over $10 per share and probably be at least $15 for FY98? (This wouldn't happen but is just to illustrate a point.) No amount of R&D could get this kind of return. Even in a 3 year timeframe. A PE of 10 would be $150 per share. Get my drift? The question shouldn't be "Will 3dfx do a buyback?", the question should be "At what price do we start?" At some point it becomes silly not to and the profit potential for remaining shareholders becomes huge. We can probably all agree that $1 is a definite yes, and $30 is a definite no. Right? So what is your price? I'm thinking 3dfx should put limit orders in at 8 and let it rip. Pat

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