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Technology Stocks : ATI Technologies in 1997 (T.ATY) -- Ignore unavailable to you. Want to Upgrade?

To: Method who wrote (3596)	6/22/1999 4:23:00 PM
From: Method	Read Replies (1) \| Respond to of 5927

-------------------------------------------------------------------------------- Merger Of Competitors Endorses ATI's Strategy >ATYT By Scott Adams 06/22/1999 Dow Jones News Service (Copyright (c) 1999, Dow Jones & Company, Inc.) TORONTO (Dow Jones)--Analysts say the merger of S3 Inc. (SIII) and Diamond Multimedia Systems Inc. (DIMD) is an endorsement of ATI Technologies Inc.'s (ATYT) strategy. Earlier Tuesday, S3 announced it will acquire Diamond Multimedia on the basis of 0.52 of an S3 share for each Diamond share. S3 only makes graphics chips or components, while Diamond Multimedia takes components and assembles them to build multimedia boards. Earlier this year, graphics chip maker 3dfx Interactive Inc. merged with board maker STB Systems Inc. ATI Technologies already both makes graphics components and assembles the boards, which has given it a cost and distribution advantage over competitors, said Brian Antonen, analyst with Research Capital Corp. in Toronto. When a personal computer manufacturer begins to use a new graphics chip in its computers, it does so by using an add-in multimedia board, Antonen said. By the time the new graphics chip is accepted in the industry, the PC manufacturer can then place the graphics chip directly in the computer motherboard. The PC manufacturers would prefer to deal with one company through this life cycle, rather than have to deal with a board maker and a chip maker, Antonen said. Companies such as S3 and Diamond Multimedia realize they have to become full-service providers, as ATI already is, if they want to land large contracts, Antonen said. Antonen said Nvidia Corp. (NVDA), a main graphics chip competitor to ATI Technologies, sells many of its chips to Diamond Multimedia for assembly into boards, so he expects that Nvidia will need to find a new arrangement, which will be difficult because there a few board makers left to merge with. Nvidia doesn't make boards. Bunting Warburg Dillon Read Inc. analyst John Wilson in Toronto also said the S3 and Diamond Multimedia merger leaves Nvidia in a weaker position. As well, the S3 and Diamond Multimedia merger involves two very different companies and will be difficult to complete. As a result, ATI could pick up market share during the merger process. Toronto-based Credit Suisse First Boston analyst Ray Sharma said the merger of S3 and Diamond Multimedia increases his confidence that ATI will meet earnings expectations. He also said the deal should mean ATI can pick up market share because of turmoil created by the merger.