Hi all,
this is a new I got today
News Alert from Investors Business Daily via Quote.com
Topic: (NASDAQ:INTC) Intel Corp, (NASDAQ:MSFT) Microsoft Corp, (NASDAQ:DIMD)
Diamond Multimedia Systems, (NYSE:HWP) Hewlett Packard Co,
Quote.com News Item #5085510
Headline: Computers & Technology Intel Tries To Do The Voodoo 3Dfx Interactive
Does So Well
======================================================================
Chipmaker 3Dfx Interactive Inc. has rebounded from losing a key
contract with Sega Enterprises Ltd. only to find Intel Corp. on its
tail.
The San Jose, Calif.-based company is bracing for the entry of
Intel, and several other large companies, into the market for 3-D
graphics chips. Next month, Intel plans to release its first 3-D
graphics chip, the 740.
Intel's entry could shake up a growing, though increasingly
crowded, market.
"Intel, with its size and weight, is a threat to anyone," said
Edward Buckingham, an analyst with International Data Corp. in
Mountain View, Calif.
Three-dimensional chips add depth and realism to computer, console
and arcade games. They also are used by engineers and architects.
3Dfx is riding high on sales of its main products. They are the
Voodoo Graphics and Voodoo Rush chip sets, which power 3-D graphics
accelerator circuit boards.
Next week, 3Dfx expects to report fourth-quarter sales of about
$20 million, beating its own expectations and those of analysts.
That should help the four-year-old company turn its first quarterly
profit.
Net income for the quarter will be about $1.5 million, says Elias
Moosa, an analyst with BancAmerica Robertson Stephens. That compares
with a $3.6 million loss a year ago. In '98, analysts expect the
company to earn about 50 cents a share, says First Call Corp. It lost
25 cents a share in '97.
But 3Dfx is watching its back.
"Intel is a formidable competitor no matter what business they are
in," said L. Gregory Ballard, 3Dfx's chief executive. "I suspect
that would be true even if they got into the automobile industry."
Ballard's strategy is to work around Intel. He doesn't see 3Dfx's
Voodoo 2 chips, due out this quarter, going up against the Intel 740.
That's because Voodoo 2 is designed for highend games. Intel,
though, is seeking volume sales of lower-end 3-D chips, he says.
"Our intention is to stay at the high end of the market," Ballard
said. "We don't think Intel's strategy is to target the high end.
They are going to be at the mainstream."
But 3Dfx's Banshee chips due out later this year could tangle with
Intel. The Banshee's aimed at a wider market than Voodoo 2.
"There will be some accounts where (retailers) have to decide
between our (product) and theirs," Ballard said. "Our strategy is to
stay ahead of whomever the competition is. With respect to Intel, we
think we can do that."
3Dfx has taken a page out of Intel's book in promoting its chips.
The chip giant made sure its "Intel Inside" slogan was plastered
everywhere. Similarly, 3Dfx has cut deals with developers of arcade
and computer games to make certain they show 3Dfx's spinning logo on
their products that use the chips.
Analysts expect 3-D will become a common feature in computers this
year. One reason is that trendsetters such as Intel and Microsoft
Corp. are embracing 3-D.
3Dfx sells about two-thirds of its chips to board makers such as
San Jose, Calif.-based Diamond Multimedia Systems Inc. Computer
makers like Palo Alto, Calif.-based Hewlett-Packard Co. and arcade
game makers like Japan's Taito Corp. account for the rest.
Rivals include Silicon Valley, Calif., companies S3 Inc.,
Chromatic Research Inc., Cirrus Logic Inc., NVidia Corp., Rendition
Inc., Montreal's Matrox Graphics Inc. and Toronto's ATI Technologies
Inc.
In the engineering market, 3Dfx faces additional rivals. They
include San Jose, Calif.-based 3Dlabs Inc., Mountain View,
Calif.based Silicon Graphics Inc. and Orlando, Fla.-based Real 3D,
part of Lockheed Martin Corp.
And like Intel, other large chip companies have 3-D chips in the
works. They include France's SGS-Thomson Microelectronics Group and
the Netherlands' Philips Electronics NV.
3Dfx weathered a different challenge last year. In July, Japan's
Sega abruptly nixed plans to use a 3Dfx chip in its new game console.
3Dfx has sued Sega and NEC Corp., whose chips Sega is instead using.
The project would have added $6 million to 3Dfx's '98 sales, says
analyst Moosa.
"When that sort of project gets pulled out from under you, you do
a little scrambling," 3Dfx's Ballard said.
Still, the loss of that big job let 3Dfx focus on filling orders
for its existing 3-D chips. It also let the company begin work on
the new generation of chips due out this year. "Sometimes these
things have silver linings," Ballard said.
As the company rolls out Voodoo 2 and Banshee, meeting demand will
be key. 3Dfx designs its chips and contracts out for their production
with Taiwan Semiconductor Manufacturing Co. 3Dfx has said that a
silicon shortage at TSMC had cost it some fourth-quarter sales.
Supply has increased, Ballard says. And the company is looking at
other production sources, he says.
"Right now, the business is growing so fast that one of the
biggest challenges is managing an extraordinary growth rate," Ballard
said. |
