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

To: Yakov Lurye who wrote (3961)	6/13/1998 6:38:00 PM
From: Pierre-X	Read Replies (1) \| Respond to of 16960

Re: Best case; Gross Margin; SG&A; V2 Sales Point granted about best case. I think I remarked that I was looking at domestic sales exclusively. The Asian economic implosion could not have happened at a worse time for 3DFX -- over nearly precisely the period V2's heyday , demand from the Asian consumer sector has been drastically muted. Point granted about GM. But there's no guarantee that GM will increase with volume in the short term. It seems to me that 3DFX has had to punch through some 11th-hour capacity agreements, which would mostly preclude the possibility of volume efficiencies. The realization of volume efficiencies is the result of long term planning and well-synchronized ramping of supply with demand, such as Intel experienced in 96. With 3DFX GM already rivaling that of Intel I would hardly expect much improvement in this arena. You said: Large portion of SG&A costs is fixed... I don't know where you came up with this. 3DFX will have to continue to expand sales and marketing operations to keep up with volume. If you look at the financials you'll see that SG&A has grown briskly. Here's the relevant excerpt from the 98Q1 10Q: "Selling, general and administrative expenses increased 422% from $1.8 million in the three months ended March 31, 1997 to $9.6 million in the three months ended March 31, 1998. The increase resulted primarily from the addition of personnel in sales, marketing, finance and administration as the Company expanded operations, increased commission expenses and general bad debt reserves associated with the increase in commercial sales and increased involvement in tradeshow and advertising activities. The Company expects that selling, general and administrative expenses will increase in absolute dollars in future periods, although such expenses as a percentage of total revenues will fluctuate." You said: Everybody seems to think that Voodo continued to sell well through the last 3 months... Comments like this always ring the alarms. Can you define "Everybody"? I realize that what you probably mean here is the aggregate of news articles, opinions, personal observation, hearsay, and the like. But if you have something more solid please share. God bless, PX