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

To: Jay Fisk who wrote (5152)	7/9/1998 3:03:00 AM
From: Obewon	Read Replies (2) \| Respond to of 16960

Has anyone noticed the fact that in just two weeks the "horrendously expensive" (IMHO) Voodoo II card selling price has dropped from $299 (perhaps with a with $30 rebate) to around $219 on the net and $259 at retail stores? While the market may not be saturated in the true since of the word (meaning everyone has one), sales has drastically fallen below production of the boards. Prices will continue to fall when TNT comes out because their will be true competition in the segment again. The question that remains is how price elastic are sales of the boards. As long as they are reasonably elastic sales could continue to increase as the price dropped. The problem is that dropping margins for the boardmakers (Diamond and Creative) will most certainly cause them to cut back on buying VoodooII chipsets from 3Dfx as they may not be able to profitably manufacture the boards. These cutbacks will cause 3Dfx to lower their chipset prices in order to keep some orders coming lowering our margins and revenue. While other board manufacturers are picking some of the slack, please remember that Creative and Diamond together accounted for something over 50% of 3Dfx's revenues last quarter. That is a LOT of slack to pick up if Diamond stops ordering as has been implied by Diamond officials and analysts. I for one don't see sales picking up significantly again until prices drop to the $150 level. I agree with most that Banshee is what will drive sales in 4Q98 - 2Q99 and the product looks good assuming that they can reduce the cost. $38 per chipset IMHO is not going to light any fires under OEM manufacturers to bundle cards with this chipset into their basic PCs. At $38, I would guess that board manufacturers would have to charge at least $150/board (if not more) starting out. Anything above $100 can kiss the major bundling deals goodbye (BTW does anyone on the thread know what ATI sells their 8MB boards to OEMs for in bulk?). The lack of any deals announced is a major risk in this stock since forward revenues depend so heavily on it. OB