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

To: Patrick Grinsell who wrote (5806)	7/31/1998 5:24:00 PM
From: Jeff Lins	Read Replies (6) \| Respond to of 16960

Here it is!!!! Finally got to talk with Dave Zacarias, CFO of TDFX. Have spoken to him many times, but today was the longest- I put him through the ringer for better than an hour! For those of you who have not talked with him, he is very nice and as helpful as he can possibly be. Here we go: -Advertising: expect most expense to be in Q4, not Q3. Could not give the exact dollar amount. Said it should be a few percent of sales. Using my own figures, 2% of 70M would be 1.4M. I believe that this is in addition to their current marketing costs. (70M is my own figure also). Could be closer to extra 2M. As far as what could offset this cost: nothing in particular; just that as they get economies from higher revenues they will save (as a percentage of revs)in some areas and make up for the savings by increasing marketing. Television? they discuss this all the time, but have yet to come to a conclusion. They WANT to do it, but of course the expense is very high. However, there may well be a minimal amount of TV advertising in selected areas; IF they do it, there would like to do it in a co-op fashion with a boardmaker. -Voodoo 1.5- This was in the cards before they realized how successful V2 was going to be. Once they realized that V2 would sell beyond the initial hard core early-adopting gamer, they canned it. Since they were never packaged, they are ok. They have used this inventory towards current sales, and we will see that inventory will decrease Significantly in Q3. -Voodoo 1- It does appear that there has been a surge at retail, though there has been minimal "ripple effect" flowing back to TDFX in V1 chip sales. -Banshee 20% of Q3 revs? I laughed when I read Timburs comments on this one. I thought the same thing: 20% of what! I relayed this to DZ. He laughed too. He sees the possibility of 20% Banshee. But they are still on record only for about 10%. Still, it should not be on a smaller revenue base. -Revs and earnings- Revs should be flattish to slightly up. Looking somewhere in the 59M range. Since the quarter is heavily back loaded, it will be hard to be exact. Earnings should be based on the same number of shares- give or take a few. Looking at .48-.51 per share FULLY TAXED. This compares to Q2 of .50/share FULLY TAXED (35%). -Sell through? still doing well. Quarter is back loaded, so things should pick up quite a bit in August- July was relatively slow, though that is part of the seasonality of the business. -DIMD? they talk to each other all the time. Relationship is fine. They have not had a lot of orders, but again expect to see some towards the end of the quarter. >>>>aside>>>> Mentioning that DIMD seems to be cutting their throat by not cutting their board prices, he told me that it was no secret in the industry that they bought up as much memory as possible back when they were just getting V2 chips. Essentially, they cornered the market. Remember the memory shortages? Not for DIMD. Now the possible jump in logic. You buy a LOT of memory. Stock up on it reaaal good. Then a bunch of people start making the memory. It drops in price- fast. You are stuck with a lot of expensive memory. In order to keep your margins, you don't drop your price on your boards. Those late to the party can get memory (once the most expensive part of the design) for cheap, and sell the boards cheap. -Pricing- the V2 should drop approx 5% per quarter, hopefully getting similar cost reductions from TSMC. Should be hard dollar (no rebate needed) $199 V2 12MB boards all over soon. -What about making your own boards? this has "been the subject of discussion" many times. They have looked at the ATI/Matrox model closely, and will certainly consider this in the future. For now, they are a chip company. (since they have many partners out there, I was surprised that he even admitted that this was a possibility! He sees "the world changing" to that sort of model...) I need to go right now, but I will post the rest later! JeffLins BTW: PCGAMER.com has info about TNT; a VERY scary looking piece of news; STB with $199 16mb boards on Aug 15th!!! And the specs looked like they have REALLY improved! I will post my comments and DZ's as well later tonight...