Bottom Line : Consistently increasingly profitable companies get rewarded.
Usual Price Sales of companies in the graphics industries, SIII, TDFX, TRID, ~ 1.
I noticed you didn't include NVDA in there. This company has never turned in a profit in the last five yrs, and their IPO was a definite success, though I guess the people who bought on momentum may see some tough times ahead...
quote.yahoo.com
I thought TDFX was a reasonable buy, but I sold at $15. It's just not clear if TDFX has the right product mix at this point to grow. If you followed the stock at all, you'd notice that it started to tank when they lost that Sega deal and never really recovered. Perhaps in a few more months, they might still be a buy.
SIII got hammered because... well, they were sued for misrepresenting their financial statements, their principals sold just before the questionable financial results showed up (over 2 quarters!). Takes a long time for people to forgive something this serious. Also, they lost (2.22) a share.
I remembered that TRID used to have some presence in the SVGA days a long time ago. Their 8900 chip had decent volumes. TRID, like SIII is not making money now, and seems to focus more on notebooks, and little on desktop. I always thought that TRID was very similar to NINE or Tseng, graphics companies on the fringe, on the outside looking in. It would be interesting if they pull a houdini and do recover.
---
Barriers to entry in the graphics market or set top box. NOt many companies are a dime a dozen. No one dies if the drivers are bad or the monitor image is flaky. Companies can pick and chose to a certain degree what they implement in their graphics chips.
Agreed. But there is such a thing as features that drive the product.
Ever tried to play DVD on a nvidia TNT card recently? How will the world react if only one or two vendors provide HDTV support? It should be interesting to see what happens.
Thus ATI is receiving a premium mulitple of 4 times compared to others in the graphics industry in part due to ATI's sneaky management. That is about fair value, IMO. It is also more than half of Intels P/S of 9.
Companies exist to turn in a profit. Unless you have some weird internet pyramid bubble scheme going on, if you consistently refuse to be profitable quarter after quarter, eventually, your stock gets hammered.
The trick behind all this? It's actually very simple. It's called product vision and the will to execute. These ATY guys have the financial results to prove they still have it. NVDA may have it, TDFX used to have it. Everyone else is just going through the motions (until they figure out what to do).
Meanwhile, if you're long, you're along for the ride. If you're short. Tough.
:-) If you hold so much that it has become > 40% market value of your total holdings, you have an interesting choice to make. Sell some? Hold? Buy more? Decisions, decisions. :-) |
