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

To: jttmab who wrote (4046)	6/17/1998 12:04:00 AM
From: Pierre-X	Respond to of 16960

Jim, flattery will get you everywhere. <g> So, call me Balaird. <gg> Well I've got one product that's cleaning up in my target market of gamers. I've got another product in the wings that's going to bat in a different ballgame -- the major leagues now. What's the next move? Is my company going to be just another one-hit wonder like Hootie & the Blowfish, or am I going to be savvy enough to leverage my assets into a career like U2 or Madonna? Well, I've gotten myself into a bit of a hole with certain strategic decisions which I now regret. But we play the cards we're dealt -- so where do I go from here? The current situation revolves around just a few primary issues. =>Question.1: Does my brand strength carry over from the gamer niche into the broader market? =>Answer.1: To some extent. I've created a problem by diffusing my brand into "3DFX" and "Voodoo" -- some consumers will not draw the connection. I've furthermore obfuscated my own product line by introducing a new brand "Banshee" that only 3DFX devotees are familiar with at this point in time. =>Solution.1: I need to work on creating more brand unity in my core products. I will issue a press release designating the offical name of my product "Voodoo Prime" in order to leverage my Voodo Brand. My monkeys (boardmakers) will handle shelf-proliferation for me. =>Question.2: Will my product remain technologically superior to the competition? =>Answer.2: I hope so, but my early lead has dwindled. It may be that my products have essentially "proven the market" and opened the floodgates to competitors starving for sales. There are many big big big companies whose other business lines are underperforming and thus are on the hunt for the Next Big Thing. Even Intel has come to this party. =>Solution.2: In this business brand strength may have an impact but by far the biggest driver of sales is speed speed speed. I will focus on leading my engineering teams. I need to keep them motivated and productive, and I need to actively recruit new talent. I have an advantage in attracting engineers since my product is inherently gaming related and thus a lot of gaming will go on. Focus on bringing V3 to market rapidly and making absolutely sure that it will be the best 3D that money can buy. Address the current lack of support for AGPx2 since even though it's not technically a bottleneck, it seems to have attracted quite a bit of media mention. I've kept mum on Banshee specs; any premature announcements will only serve to cannibalize current V2 sales. At this point Banshee -- excuse me, Voodoo Prime <g> -- is as good as it is, this chapter is written. My goals are to make sure that my product cost and volume targets are in line, and I'm going to spend a lot of time with TSMC and ASE to make it happen. I'm also spending time with key OEM customer prospects to get them excited about the possibilities with Voodoo Prime. I've already got my foot in the door at Compaq and Gateway since they offer V2 boards as an option; time to break that door down. =>Question.3: Will I be able to create and maintain control of a proprietary standard around which other vendors will build infrastructure? =>Answer.3: I've given this my best shot with the development of the Glide API. Fortunately early versions of DX/D3D from Microsoft were (predictably) lame, providing a window of opportunity for my API to establish itself as a de-facto standard. For a while there it looked as if it might happen, with a profusion of game developers supporting my API and in some cases -only- my API which did wonders for my sales. Unfortunately Microsoft will continue to refine D3D probably forever, and in fact this upcoming release of D3D r6 is so good that I've been forced to publicly state that we are developing optimized drivers for it. =>Solution.3: This one is tough. I've got a choice to make: whether or not to kill Glide. I don't want to do it since we've invested so much time and effort developing and promoting it, but it's looking like long term, Glide will have no raison-d'etre. If I decide to go the hard route and keep plugging, I'll have to make sure that I build in proprietary features into my hardware which are attractive enough to push developers to the extra effort required for supporting multiple 3D APIs. If I'm smart though, I'll admit that I was close but didn't make it, and kill Glide, concentrating instead on getting my hooks into D3D development to make sure it goes my way as much as possible. =>Question.4: What's going on in the overseas markets? =>Answer.4: Even though many foreign economies are in turmoil right now, sales of PCs are still healthy and the penetration of 3DFX products relatively low. Furthermore, I've got a sneaky edge in those markets -- software can and is heavily pirated there, but hardware can't. All those illegal copies of Forsaken, Unreal, Quake2 etc floating around out there are creating demand for V2 and later, VP (Banshee). =>Solution.4: I should establish a base of operations overseas to oversee sales and marketing efforts in East Asia, because that's where I expect the possibility of massive growth from the gaming niche. If I'm going to hit my target of $2BB market cap, implied annual earnings at a 30X multiple assumption are $66M ... with a 10% net margin assumption means target revenues of $660M ... $30 ASP assumption = 22M parts. Per year. Hmm, V2 isn't going to get me there, best best best case sales for V2 is about 15M units/ann. Since ASP on VP (Banshee) is lower I need to move 15M VP parts to hit target. Whew. With 30M parts moving per year I've got between 23% and 30% share of the TOTAL video parts market, depending on whose 1998 PC numbers you believe. I think we both realize this isn't going to happen. $1BB market cap just isn't going to happen, Jim. Even S3 in their heyday never broke much over $1BB in market cap. The funny thing is, you look at their corporate campus (I was there about a month ago) and you can see the management hubris. S3 has a gliztier HQ campus than Intel, just down the street ... even though their market caps differ by a factor of 300. I hear Andy works in a cubicle, too. I need to eat dinner. <g> --to be continued-- Coming in the next exciting episode of "Balaird and Voodoo Prime": Question.5: Dealing with past failures (Voodoo Rush) Question.6: Blasts from the past (S3) Question.7: What's going on with the arcade business? Question.8: In bed with AMD Question.9: Application seeding PX