3DFX Message Board - Msg: 7975566

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Technology Stocks : 3DFX

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To: Stuart C Hall who wrote (10789)	2/22/1999 11:21:00 PM
From: Michael G. Potter	Read Replies (1) of 16960

I put most of the meat in my quick post, but I didn't really capture the downbeat discussion on inventory and working capital. STB is stuck with a great deal more TNT inventory than they need. They ran cash negative last quarter and ran up $18 million in short-term loans. They said that they wanted to preserve their "cash" and that they were being charged a facility charge anyways, but they are paying interest on what they borrowed. They did say that they've paid down part of the loan already and expect proceeds from inventory sales to help here. They said that less than expected growth from Dell was one factor (and Dell is great at keeping inventory in the hands of their suppliers. Any supplier has to be ready to meet the high growth expectations. A dip and the supplier eats the higher inventory). The tone was slash and burn with the TNT inventory. Sounds like Creative and Diamond are going to get some price pressure from STB on the retail front. The problem is that they don't want to lower prices too much and fill up the channel with TNT just before the launch of V3 <they didn't say that, that's my concern>. Tier 2 OEMs change cards more quickly and the competition targeted them with worries about how committed STB would be to the TNT. The good part of the CC was where they said that STB made nVidia and that they've brought the OEMs through multiple chip suppliers as technology changed and they'll continue to do the same. Multiple wins for the V3. Expanded range out of just the high-end of the lines. Retail launch 4X larger than ever before for them (not that impressive as they're not huge in retail). Staffing up to serve the retail market. Some small synergies in the merger (3Dfx only has to support one card maker). Hopefully someone else will post their impressions as well. Michael

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