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

To: willcousa who wrote (14340)	5/9/2000 8:54:00 AM
From: willcousa	Respond to of 14577

I want to add that mp3 music is a great enabler for musicians who can't get past record company people to get before the public. They can make their music known just as we make our thoughts known here. And they can do so at virtually no cost. So there are two driving forces for web-based music, one totally new.

To: willcousa who wrote (14340)	5/9/2000 9:04:00 AM
From: John Nasser	Respond to of 14577

Monday May 8, 2:36 pm Eastern Time Forbes.com As The Gadget Market Grows, So Does Flash Memory By Arik Hesseldahl Electronic gadgets are big business. Consumers are snapping up mobile phones, pagers, PalmPilots, MP3 players and digital cameras in record numbers. As many as a 1.2 billion mobile phones will be shipped each year by 2004, according to Cahners In-Stat Group, Scottsdale, Ariz., up from about 400 million this year. S3 (Nasdaq: SIII - news), which sells the trendy little Diamond Rio MP3 player, reported a 69% surge in unit sales over the fourth quarter of 1999 and has plans to expand into home and car audio systems. A recent study by InfoTrends Research Group found that digital cameras will outship film cameras by 2002 and will exceed 42 million units by 2005. And inside each is a little piece of silicon called flash memory. Flash memory is a type of semiconductor chip that, unlike the memory found in most PCs, stores information even after the power has been turned off. Enter an address or appointment into your PalmPilot and it is flash memory that stores the information when you switch off or change the batteries. Ditto for the music files and pictures in your MP3 player or digital camera. Flash memory is called that because it allows you to quickly erase and save data in large blocks of several thousand bits at a time, or ``in a flash.'' Conventional SRAM and DRAM memory data are erased and saved a bit at a time. Brian Matas, vice president of IC Insights, a semiconductors market research firm in Scottsdale, Ariz., estimated this year's global flash market at $10 billion, an increase of 119% over the previous year. He expects the market to grow in size to $18.3 billion by 2003. Unfortunately, there is not enough flash to go around. Semiconductor manufacturers such as Intel (Nasdaq: INTC - news), Advanced Micro Devices (NYSE: AMD - news) and Japan's Fujitsu are among those struggling to a sudden surge in flash demand. Fujitsu said last Wednesday that it plans to spend $550 million to triple flash manufacturing capacity at its facility in Oregon by 2002. Intel is also expanding its capacity, pumping $1.5 billion into a Colorado fabrication facility, or ``fab,'' it acquired from Rockwell International for flash production. Intel said it shipped flash in record numbers last quarter, though it didn't give specific numbers. AMD chief executive William J. ``Jerry'' Sanders III said in a recent speech to shareholders the company plans to double flash capacity in 2001 and possibly add a third fab to the Japanese facility it co-owns with Fujitsu, which he said could double capacity yet again in 2002. Yet in a case straight out of Economics 101, flash prices have stabilized but have not necessarily begun to increase. In response to the increasing shortage, electronics manufacturers with the holiday gift-buying season in mind have been locking in exclusive long-term deals with flash suppliers. Examples include mobile phone maker Ericsson's (Nasdaq: ERICY - news) $1.5 billion deal with Intel, and a $400 million deal between AMD and Korea's Samsung. Similar deals with other flash suppliers are likely to follow. Those who haven't arranged their flash supplies may find themselves running short. Other semiconductor companies looking to cash in with renewed interest in flash include Japan's Toshiba, STMicroelectronics (NYSE: STM - news) and Hitachi (NYSE: HIT - news), each of which reported more than $100 million in flash business last year, according to Rich Wawrzyniak, analyst at Semico Research, based in Phoenix, Ariz. And while flash is just part of the story behind increasing profits at semiconductor giants like Intel and AMD, the upswing in the market is most visible at pure-play companies like Silicon Storage Technology (Nasdaq: SSTI - news) and SanDisk (Nasdaq: SNDK - news), both based in Sunnyvale, Calif. Last month SST reported a $9.6 million profit on revenue of $62.3 million, versus a loss of $6.6 million on revenue of $18.3 million in the same quarter a year ago. Shareholders in SST have ridden the flash shortage to all-time highs--from about $7 per share last July 1 to more than $105 on May 1. SanDisk, which makes removable flash memory products that are particularly useful in digital cameras, just reported a 148% surge in first-quarter revenue over the quarter a year ago. Shares in SanDisk started July at $44 per share, climbed to $149 by Feb. 23, when it split 2-for-1 and topped out at $145 on March 27. On May 4 it closed at $90.50. Analysts expect the shortage to continue into 2002, after which new manufacturing capacity will begin to come online in 2003 and 2004, eventually pushing the market toward another likely period of oversupply, Matas said. While IC Insights is forecasting a year-over-year growth rate of about 22%, or $3 billion, in the flash market between 2001 and 2002, that growth will slow over the following two years to slightly more than 8% ($1.4 billion) in 2003 and to less than 3% ($500 million) in 2004. The semiconductors industry is, after all, a very cyclical business. ``There will be a lot of new capacity coming online, and we expect an overall industry slowdown around then,'' Matas said. Go to www.forbes.com to see all of our latest stories

To: willcousa who wrote (14340)	5/9/2000 1:53:00 PM
From: ShortyBear	Read Replies (1) \| Respond to of 14577

You bring up a good point that the Rio sales to date may be largely to early adopters, so there is some risk that the Rio won't be the product that "crosses the chasm" into mainstream use. BUT ... it appears to be the leading horse so far, and should be favored to win or at least place. If S3 becomes firmly entrenched with the everyday consumer, I would guess that, perhaps after some trigger event, this stock will start moving up almost vertically, setting significant new highs etc, until it reaches a level commensurate with the status of owning the primary media-less music equipment brand. For example, if S3 can get music kiosks out there and/or music-downloading-devices (i.e. no computer required to operate) this will probably be key to getting the low-tech consumer onboard. It won't happen instantly, but it appears to have a good chance of happening. My prediction is that once the everyday consumer is onboard to the concept of media-less music, then poof -- CD/minidisks/memory-sticks/ whatever media are INSTANTLY obsolete. And so are brick & mortar CD stores, unless they can somehow adapt to media less music (e.g. by becoming music demo studios/, kiosks where you can try-before-you-buy/download, or something like that). In 5-10 years time, it seems clear that it's going to be a completely new world in regard to music distribution. I also agree with the comment that the tiny musicians have a lot to gain by bypassing the big labels, just like a tiny web site can distribute the news as easily as abcnews.com. Fortunately for S3, the big money is currently well invested in the "old way" of doing things, and instead of jumping on the technologies of the future, they are instead making what some might view as lame (and probably ultimately futile) attempts to retard change. It is kind of like if in 1900 the buggy manufacturers tried to compete against autos by using all their dollars and legal muscle to get the posted speed limits reduced. A few early victories are possible and even likely, but inevitable they will be run over. And eventually, very few buggies will be sold. If the buggy manufacturers were smart, they would have become auto manufacturers. But they can't, because their leadership "knows what's right" because that's how they got to the top of their market, and if any more open minded individual at the bottom tries to tell them different they will set him/her straight. An over simplification perhaps, but perhaps a reasonable model of how this process actually takes place. PS - Ditto for VHS tape movies and video rental stores, although S3 seems to be ignoring that market.