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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: mr.mark who wrote (13831)	9/10/1999 12:01:00 PM
From: Synapsid	Read Replies (1) \| Respond to of 13925

I've been looking at CREAF's prospects in terms of operating results. I see the following as positives: - Leadership in retail and reseller market for soundcards and certain other products (not graphics) is as strong as ever. - Major PC OEM penetration is strong and growing, concentrating on the performance segment. This strong market position should pay some dividends in a period of growing PC demand (hot season). Issues: - How does "software audio" integrated into new motherboards affect CREAF? This could put pressure on lower end soundcard products. However, I believe that this affects mainly the chip-on-the-motherboard segment where CREAF is not very strong. The reseller channel is relatively resistent to integrated audio. A paradoxical beneficial effect is even conceivable (the perceived "added value" of a Creative card might increase). - What is going on with graphics? The virtually exclusive retail introduction of NVIDIA's GeForce 256 product sounds good. However, I have serious concerns about the rest of their graphics business. Blinded by potential memory cost savings, Creative made a heavy bet on S3's Savage4 product. This has turned out to be a garbage product with negative brand recognition. In its SEC filings S3 disclosed the amount of sales to Creative in the second quarter, which was about $6 million. At <$20 per chip that equates to 300,000 boards or more. A lot of this inventory still appears to be in the channel. At the same time, Creative has high-end TNT2 based products which are doing OK. However, Creative has only introduced their "TNT2 Value" product using the TNT2 Model 64 in a very limited way, probably because of Savage4 inventory concerns and impact on high-end TNT2 sales. This delay could result in a lost opportunity to gain market share in graphics. To illustrate, I recently visited a European retail chain store (Dixons) and only saw overpriced Savage4 and Graphics Blaster TNT products on the shelf. An important question is to what extent last quarter's graphics charge applies to Savage4 vs older products. If it applies to older products, there could be more charges due to graphics.