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Technology Stocks : 3DFX -- Ignore unavailable to you. Want to Upgrade?

To: Chip Anderson who wrote (3896)	6/12/1998 10:20:00 AM
From: Pierre-X	Read Replies (2) \| Respond to of 16960

Re: Mark Rejhon's Diatribe I thought I might comment on some of Mark's comments, which are highly apropos. Once again I must assume the role of doom and gloom ... Mark said: And my friends are starting to buy 3Dfx cards at higher frequencies in the last 2 months, partly because of the game named Unreal. This is what I've been hoping for as a 3FDX long. Unreal, and later on, Duke F, Sin, and Trespasser should "gild the lily" for the legions of 1P-shooters stepping up to the Voodoo plate. Only gamers can really have any clue about investing in game companies, and 3DFX is a game company if there ever was. I just wish Gran Turismo would show up in a Glide flavor soon ... Mark said: Analysts like to err on the low side. Um, Mark has no clue what he's talking about here. Analysts err indeed, but systematic bias, if any, is not the result of conservatisim. Mark said: True, there is inventory overflow at some stores, but the cards are still "flowing well"... That's a pretty good spin on what is really a piece of unwelcome news. Best case we would have liked to have seen board shortages nationwide and channelwide. Since that isn't true, I have to assume the best case scenario (12M) is not occurring. How well a product "flows" is irrelevant; the supply/demand picture is really what determines the success of an enterprise. Mark said: 3Dfx said they will be ramping up their marketing in the second half of 1998. This means more mainstream people. IMHO: if true, this is a strategic marketing error. Voodoo boards are not mainstream products. Only hardcore 1PS gamers buy Voodoo boards. Mark said: 3Dfx is still a niche market, BUT* has the potential to outgrow their niche market.* Nope. How exactly will they outgrow the niche market? Mark said: Cheap 3Dfx cards are good for 3Dfx. It's the board makers that are having tighter margins. Again, a positive spin on ambiguous data. Cheap cards could indicate demand short of expectation. Mark said: Cheaper computers means more money in the consumers' pockets. I agree 100% here. Mark has either by accident or design stumbled on a delightful microeconomic principle called the "income effect" -- asymetric component price changes translates (somewhat ironically) into greater demand for those components that do not experience the same magnitude of decline. Mark said: Hint: Coca Cola and Pepsi Hmm, comparing soft drinks and 3D parts does not seem to me an analogy yielding instructive conclusions. Mark said: More than a third of homes have a computer. Which loosely corroborates the 35-40M numbers that I've seen. This means, BEST CASE scenario: 20% 3DFX penetration => total market size 8M units. From that, I would guess around 2M has already been done, leaving 6M. Mark said: Consider that there was an explosion of 3D accelerated games near the end of 1997... The only one that mattered was Q2. Well, maybe TR2 helped a little. As games increasingly require hardware acceleration, the trend can only get better. This does not necessarily follow. Depends heavily on the quality of those titles -- which, at this time, does look very, very good. Mark said: Look at how POORLY small Internet Service Providers (the graphics chip equivalent of S3, etc) did in the stock market... Um, which small ISPs are those? The market performance of ISPs is not demonstrably correlated with size. In any case, comparing the ISP industry -- an infrastructure/network economics model -- to the 3D parts industry, an enabling technology model, is ludicrous. PX