3DFX Message Board - Msg: 9519637

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Technology Stocks : 3DFX

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To: Piranha who wrote (12521)	5/13/1999 7:36:00 PM
From: Patrick Grinsell	Read Replies (1) of 16960

DLJ estimates don't make sense... Okay, assuming that 3dfx is telling everybody to shoot for a target of around 600M for revenues in 1999, then the 2000 and 2001 numbers look way too low. Actually, if 3dfx really does think they can do 50% OEM then 600M in revenues is way to low, but I'll stick with company guidance here. Operating margins for STB were at about -1% and 3dfx at 11%. Since revenues for each company were fairly close, I think we can average the two numbers to get a rough estimate. That gives an average operating margin of 5%. Using 24M shares outstanding yields eps of $1.25 for 1999 based on this information alone. From DLJ's own comments: The union of 3dfx and STB should eliminate inefficiencies and improve margins on board sales. I didn't even take this into account in the above analysis. What's wrong with this picture? The way I figure it is the following must be the issue: A) DLJ is being very conservative. B) 3dfx is planning on going on a spending spree. (DZ did tell me that SG&A should remain even relative to revenues for the combined company so this doesn't make sense.) C) A combination of the above. The conference call should be revealing. Pat

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