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

To: Ski who wrote (9174)	2/2/1998 3:25:00 PM
From: Bill Lin	Respond to of 14577

Ski, The $30mm figure is based upon the $5/share price. so...if you get $15mm in cash, and 3mm shares, and it goes to $12, well, you see where i am valuing nVidia in the end...$51mm. why is $51mm a fair value? because if the IPO, they are locking in for 1 year before they can sell their shares, if not at the IPO. If they sell at the IPO, they will leave money on the table, as the price will ramp quickly. If they IPO at $12/$17 then they will dilute the holdings of their company, and raise maybe $50mm in cash. with the Cash, they have to recreate what ATI and S3 already has...a corporate infrastructure, a world wide distribution network, blah blah blah. They give up a bit of immediate gains by selling out to S3, but will leverage both technology and infrastructure with the deal. I've been advocating this merger since Oct (i think), but GJ was too screwed up to try to make it happen. Besides, don't you think the CEO of nVidia would be excited at the prospect of taking over S3 when Terry Holt gives it up later this year? TH wants to retire. So you get to pay everyone an average of $700k with the buyout, and then give them stock that is liquid and will appreciate 100% a few months after they merge. But yeah, if they can get 5mm shares out of S3, they will do better. Oh, but i really didn't answer your question well. The value of nVidia should be based upon a multiple of sales. I REALLY doubt they made more than $5mm last year, and will make only about $12mm total this year. 3X sales or $36mm is reasonable. Being in S3's distribution system should ramp that sales number to $80mm. That is why S3 will go to $12 after the merger...The synergistic effect, not because all the sales will be just from nVidia. The problem is that both parties must not be greedy. So I doubt they will make it happen. BTW, did you see the Voodoo 2 announcement? you should urge ATI mgmt to buy 3DFX. That will ensure your high end for the next 3 years. Any rumors on n4 from nVidia? Do you think it will match Voodoo2 performance? What's with the 2 texture setup engines in Voodoo2? is that the only way to speed up 3D manipulation these days? BL