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

To: Dwight Griffin who wrote (5171)	7/9/1998 5:30:00 PM
From: UCLAlumnus	Read Replies (1) \| Respond to of 16960

WEll, if anyone wanted a lower buying opportunity...here it is....We have a low price now because of decreasing future earnings. This just makes it look like the well is already running dry. If we don't have .80 or more for earnings - we're hitting 11 in two weeks. :( Open at 15 tomorrow, close at maybe 14. :(

To: Dwight Griffin who wrote (5171)	7/9/1998 7:27:00 PM
From: Hal Rubel	Read Replies (1) \| Respond to of 16960

Diamond Multimedia Loss Not At All Bad for TDFX "we had expected until the end of the quarter to achieve roughly break-even ... Excluding the effect of the one-time charge, the net loss for the quarter was $7.3 million ... sales of our Monster 3D II product, while quite strong, fell short of our expectations toward the end of the quarter by approximately $20 million ... driven by response to competitive pressures in graphics late in the quarter, we spent or accrued approximately $3 million in unanticipated incremental channel-related costs, including market development and co-op funds and channel sales incentives." Hal's Autopsy of Diamond's Morbid Report: It does not take much reading between the lines to see that Diamond is just blowing smoke at shareholders. Considering their tired product mix, who is to say that breaking even was a justifiable expectation in the first place. What stands out is that 3dfx was their one shinning ray of hope in such a dark hour. The inescapable truth here is that the availability of our product saved their butts from a truly monumental ass kicking. If it weren't for us, where would they be now? We are the real heros of their sad tail/tale. This message will not be lost on Diamond, or on anyone else in the industry. You need 3dfx just to survive. Hal PS: What TDFX related conclusions might we be able to divine from Diamond's numbers?: Well, lets assume that TDFX was at the time counting on a projection of steady purchases from Diamond to account for that 5 million sold figure that appeared one month ago. And why not? Diamond in effect says that they would have broken even instead of loosing $7.3 Million if only for the two items mentioned. Eliminating the $3 Million increased cost of sales to move other products in the line, the $20 million short-fall in 3dfx Monster board sales from early expectations would have generated the remaining $4.3 Million needed to break even. So, how many chips is that? Let me guess. Selling at an assumed price of lets say $175 per board to distributors and retailers direct, $20 million in sales would represent 115,000 board chips. Alternately, assuming that the boards are sold at 2/3 cost and 1/3 profit (a raw guess), at $60 profit contribution per board, $4.3 Million in lower profits represents 72,000 fewer board chips. The two estimates of reduced chip purchases average out to less than 100,000 boards for Diamond and chips for TDFX. Diamond being TDFX's biggest customer, and if the 5 million chip sales rate was on track when made a month ago, then TDFX total sales may in fact be a very healthy 4.9 million this period. With the product mix skewed toward the higher margin Voodoo II chip this quarter, even with an average selling price between $45 -$50, we may expect earnings well above expectations. My numbers are too rough to execute precisely, but they feel like earnings of $0.70 - $0.90 per share. With 4.9 million chips sold by the end of the quarter, 5 million chips sold by the earnings conference call at mid-month would then be doable. As for Diamond, it looks like they flooded their sales channels judging from what's in the stores. The product continues to sell. Either Diamond bought 100,000 too many chips this quarter or will buy 100,000 less chips next quarter. So what. That is what happens when you have a hit on your hands. Besides, Apple Mac sales will kick in this quarter to make up this difference. HR

To: Dwight Griffin who wrote (5171)	7/9/1998 8:49:00 PM
From: David R. Parker	Respond to of 16960

The obvious reason for Diamond's less than expected sales of Voodoo2 cards is their price point. They are much too expensive for a reference design board. I'm in the process of configuring and ordering a new PII400 (probably from Dell) and am shopping for a Voodoo2 12 to put in it. I have been checking both retail and internet channels and Diamond is overpriced. Both NECX and BUYCOMP have Creative's Voodoo2 12 for $222 and $198 vs $273 and $250 for the similar Diamond product. NECX has the STB Black Magic Voodoo2 12 for $233. I've noticed the same trend at CompUSA, STB for $199 recently vs $299 for the Diamond. Diamond's sales slump with this product is imho due to their price points and perhaps the very poor reputation they have for support and customer service. Creative has mopped the floor with Diamond in price, availability, newsgroup participation (check out the 3DFX news groups...Creative's key people are very active) and customer responsiveness. Now...if we were getting warnings from other OEMs about poor Voodoo2 sales, we should be concerned...but Diamond's problems alone don't cause me too much concern. I'm looking to buy and would have to be "nuts" to buy a Diamond board. Regards, David