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

To: UCLAlumnus who wrote (5112)	7/7/1998 8:26:00 PM
From: Perfect Tommy	Respond to of 16960

Interesting note from the _Electronic Engineering Times_ trade rag. From the "Investor Insight" column on page 31. "Driving Down: Long held in high esteem for its high-end strategy, 3Dfx Interactive, Inc. last week came out with Banshee, its 3-D graphics controller for the mainstream market. Alas, higher volume means lower margins -- NationsBanc Montgomery Securities downgraded 3Dfx's stock to a 'hold' from a 'buy' in anticipation of the Banshee announcement." First time I've seen that logic put on the Montgomery decision. Question to the forum: I understand the logic of higher volume and lower margins. But if higher volume also means higher EPS what's wrong with an adjustment of margin expectations? Many high techs have moved through that change as they transition from small/niche to larger/main stream. Is it the risk management won't recognize the need for margin adjustment planning? That seems like a punk reason in comparison to the up-side for revenue and earnings growth. Thoughts? - PT