TO ALL : Found this entry on DIMD thread
Here's some interesting reading, guys from Monday's IBD:
<< A visual revolution is on the horizon, says Osman Kent, chief executive of 3Dlabs
Inc., which makes three-dimensional chips.
Flashy 3-D computer graphics that add depth to images will become a PC mainstay
during the next few years. And powerful number-crunching graphics processors - like
the kind 3Dlabs makes - will help make it possible, he says.
Kent predicts 3-D graphics hardware likely will become standard in personal
computers for consumers by year's end.
''A whole new generation of applications that try to create an illusion of reality are just
starting to embrace 3-D,'' Kent explained.
But for right now, the 3-D graphics market presents a chicken-and-egg problem, Kent
says. Firms like 3Dlabs have chips with the processing power and a low enough price
to bring 3-D to the masses. The only trouble is there's little 3-D software to go with the
hardware.
''About 99.9% of the 3-D chips shipped last year are being used as 2-D devices right
now,'' Kent said.
Kent hopes that the world's PC users will turn to 3Dlabs' graphics chips once the
software does become available.
But the company isn't stuck waiting for the market, says Kent, who has been in the
3-D field since 1984. He was with Dupont Co.'s Pixel Systems Ltd. when the
six-year-old unit was spun off as 3Dlabs in April '94. Because high-level graphics has
long been the company's bread and butter, 3Dlabs now holds about a 70% share of all
hardware sales to professionals such as architects and engineers.
The company markets processors for professionals' use under the name Glint. The
chips are incorporated into some high-end computers made by Palo Alto, Calif.-based
Hewlett-Packard Co. , Houston-based Compaq Computer Corp., San Jose,
Calif.-based Acer America Corp. and others. They run on the Microsoft Windows NT
operating system.
Glint chip sales still make up the majority of 3Dlabs' revenue, Kent says. However,
that could change thanks to the company's Permedia chip line. The lower-power and
lower-price Permedia line targets the future 3-D market.
Leading graphic board makers have recognized Permedia as a top technology, Kent
says.
Milpitas, Calif.- based Creative Labs Inc., San Jose, Calif.- based Diamond
Multimedia Systems Inc., Fremont, Calif.-based Leadtek Research Inc. and San Jose,
Calif.- based Elsa Inc. are using Permedia. The chips power graphics accelerator
boards sold to businesses and consumers.
The company is unique in supplying both the professional and consumer- business 3-D
market segments, says Geoff Ballew. He's a graphics market analyst for market
research firm Dataquest Inc.
There's certainly a giant market opportunity for 3Dlabs, a small but well-known player,
says Leonard Brecken, an analyst with Oppenheimer & Co. Between eight million and
12 million accelerators using graphics chips were sold in '96, Brecken says. He
expects about 25 million units will be sold in 1997.
That explosive industry growth isn't just short-term, either. The professional and
business 3-D market segments could grow about 150% a year until the end of the
decade, some analysts say.
Brecken says 3Dlabs should keep up with that triple-digit pace through at least '98.
The company's sales will grow 155% annually for the next two years, he predicts.
Estimated earnings are 76 cents per share in '97, up from 14 cents in '96, Brecken
says. He estimates '98 earnings will be $1.03.
UBS Securities and Oppenheimer took 3Dlabs public in November. The company
sold 2.5 million shares at $11 a share. Proceeds to 3Dlabs were about $22 million.
In June, 3Dlabs introduced Permedia chips. Permedia will be used to run the next
generation of complex 3-D business software, Brecken says.
Mike Feibus, an analyst with Scottsdale, Ariz.-based Mercury Research, agrees that
Permedia is one of the hottest chips targeting the business 3-D market.
''However, the best don't necessarily make it in the mainstream,'' Feibus warned. ''It's
who has the best product at a particular price point.''
A host of graphics companies already makes low-level 3-D processors, however.
Among them are Santa Clara, Calif.-based S3 Inc. , Fremont, Calif-based Cirrus
Logic Inc. and Mountain View, Calif-based Trident Microsystems. Right now,
low-level hardware is mostly used for 3-D games.
Permedia chips are a cut above what these companies have to offer, according to
Brecken. He calls many competitors' chips ''free-d,'' because they're mainly 2-D chips
with some 3-D functions tossed in. The better technology will allow Permedia chips to
run complex games and consumer-level drawing software.
It helps that 3Dlabs has three industry-leading partners backing it, Kent says.
Board-maker Creative Labs owns about 18% of 3Dlabs. Dallas Computer
manufacturer Texas Instruments Inc. owns about 4%, and Santa Clara, Calif., chip
giant Intel Corp. owns 2%.
At least two of these partnerships are paying off. Creative Labs incorporates 3Dlabs
products in its hot-selling 3D Blaster boards. And in November, 3Dlabs licensed its
technology to Texas Instruments. TI now manufactures and sells the Permedia
processors.
In pro forma results for the third quarter, 3D labs had net income of $1.4 million on
$5.9 million of sales. Per-share and comparable figures were not available. The
company trades near 20 under the symbol TDDDF.>> |
