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Technology Stocks : S3 (A LONGER TERM PERSPECTIVE) -- Ignore unavailable to you. Want to Upgrade?

To: Charles R who wrote (13391)	7/18/1999 8:42:00 PM
From: SBHX	Read Replies (1) \| Respond to of 14577

An ASP of 8 indicates heavy weighting of the Trio and Virge class of chips in unit sales. $8 essentially means no margin. The packaging of each chip alone is going to be roughly 1c/pin(ball). The ASP going up to 10 is an interesting number. You could calculate either the Savage4 ASP or the % Savage4 sales if you know the other. Let P=Savage4 selling price. Let N=portion of savage4 sales as expressed in ratio of units of total chips. Then (NP) + (1-N)8 = 10. Or (P-8)N = 2. This means that If P>18, then N<1/5 or < 20%. Here's a sample table of P & N based on the above. (P,N) (11,66.7%) (12,50%) (13,40%) (14,33%) (15,28%) (16,25%) (17,22%) (18,20%) (19,18%) (20,16.7%) (21,15%) (22,14%) IE: if we know Savage4's sold for $16, then we know that savage4 made up < 25% of that volume. This % is critical, because as we all know, Whitney will destroy virge and trio, so that particular set of chips are about to go to zero-volume. It's important for Savage4 to have high %age of sales, but if the savage4 is bigger than the virge and trio and is more expensive to make, which means costs go up. I doubt that at $12 (the 50% point), they can make any margin here. Given the accepted ASP decline of each chip line as it matures, the price can only go down... Market share is a funny thing. There's overall market share as opposed to market share in specific segments. S3, which used to have little presence in the actual 3D desktop will see huge % growth here. But I'm going to try to guess their unit sales from their balance sheet with some high-school math. Maybe we'll know what kind of 'great-market-share-gain' Potashner was referring to. :-) S3's sales are : 57M this Q (June30'99), 44M lastQ (Mar30'99), 53M June30'98. If ASP>10 this Q, they sold < 5.7M chips, not bad for 3 months. Now, if ASP=8 Mar99, then they sold 44M/8 = 5.5M chips Mar99. And, if ASP=8 Jun98, then they sold 53M/8 = 6.625M chips Jun98. So let's say Potashner is correct, then it means S3 sold at most .2M more chips this Q than the last one. If you apply the same sort of analysis to the NVDA results, I think you'll be surprised at what numbers you see emerging. :-) Try it. A growth of 200K chips in a quarter is quite good, but to put that in perspective, I think the current market leader ATI sells that many chips in one day alone (assuming they work 5 day wks), and the total graphics chip consumed is >> 100M/yr. So this huge market share gain by S3 seems a bit exagerated. What do you think? I'm not an intel insider, so I don't know the current status of this thing, but the RTC is always the thing that gives the most trouble to people trying to integrate these things into the South Bridge (Sorry, they're known as 'hubs' now), but people have solved them before. I agree with you on what Whitney might do to this business in the coming quarters but there seems to be a disconnect here. Potashner, in the conf call, clearly said their ASPs have crept up into >10 range from $8 range. And he has said in no uncertain terms that their market share is growing right now.