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

To: Ram Seetharaman who wrote (13886)	12/27/1999 1:33:00 PM
From: Bill Lin	Read Replies (1) \| Respond to of 14577

I think the proper perspective is to see which graphics company has the greatest cash balance to found research and development going forward. Next is which company has a model to BUILD cash flow versus suck it dry. The graphics industry has typically been a bad sector to invest in, with the exception of NVDA and ATYT and even now ATYT is starting to suck wind and cause investor indigestion. S3's direction is low cost high volume and potentially average margins. This is a good standard strategy, but requires VERY good inventory management. The question is, can they do this without creating bleeding edge technology? Can they provide 2nd best technology for very low prices and still make substantial cash flow? You can look at ATI's struggles right now for an indication. They are still the gorilla, but NVDA is starting to make them look over their shoulder. The answer is, sort of. If you can get the best technology 6 months later for 50% off, then you want to buy the leader or PC Mag recommended board. Or a board that is pretty good for 25% less. TDFX missed 2 design cycles, while NVDA nailed this season. S3 was late, and suffered through its DIMD consolidation (too many business units), and its S2000 is 3rd best. Matrox has a good chip, but is too small and under capitalized to be the market leader. ATI is slow in its development cycle (compared to NVDA), and its chips may be only as fast as the S2000 at best. But with the Rio/MP3 potential, UMC stake, DIMD webstore, etc. S3 is a better diversified play than a pure play graphics chip maker. With the riskiness of being a pure play graphics company, S3 is correct to focus more on communication and networking and chipsets than only graphics. BL