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Technology Stocks : 3DFX -- Ignore unavailable to you. Want to Upgrade?

To: louis mason who wrote (13806)	7/23/1999 12:22:00 PM
From: Obewon	Read Replies (1) \| Respond to of 16960

The recent earnings reports by SIII and Diamond indicate that 3D add-in cards is currently a rough business. Diamond just reported sales down 25% from last year (of course that was during the heydays of the $300 Voodoo2). Additionally, Diamond claimed that they had heavily discounted older 3dfx-based products to clear inventory and the channel. They mentioned gross margins of zero or near zero to get the stuff to move. While this could be very alarming if it translates to reducing 3dfx's gross margins, I see several reasons why it won't. Even with the "reductions" that Diamond was offering to move out their inventory, I still couldn't find a Diamond Monster Voodoo2 for under $120 in any of the stores I visited (and every store seemed to have one on the shelves at the $120-130 price range). 3dfx is selling Voodoo2's for $99 and moving alot of them (as PC Data numbers indicate). Diamond's inventory was high cost so that 3dfx can make a good margin even while undercutting Diamond severely. Plus, while Diamond was claiming to have cleared out 3dfx-based products, inventories barely dropped on a 25% drop in sales and accounts receivable rose appreciably. Diamond's stock-for-reducing accounts receivables transactions were also conspicuously absent and the currently disputed liability/receivable payable to 3dfx has the probably effect of increasing liabilities and decreasing accounts receivables. (Operationally, Diamond is a basketcase. The only value is the RioPort business and the only real reason it has value is because the market sees it as an Internet play (thus it doesn't need profits) and an IPO would net the seller a huge premium over its actual worth. ) Obewon