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

To: Chip Anderson who wrote (7162)	9/14/1998 10:59:00 PM
From: Michael G. Potter	Read Replies (2) \| Respond to of 16960

I posted quite a while ago about the effect that a new product introduction can have on sales. You need to meet the heavy initial demand and then you need to stock shelves (in retail, an empty shelf is bad - you need something for customers to buy). 3dfx seems to have sold into a heavy demand and the boards are selling but not as fast as was hoped. I think it is the "hoped" sales that tripped up the company. Where did the "hoped" sales goto? Wel, my guess is that the TnT introduction had something to do with it. Yes, the initial results are somewhat encouraging if you're a 3dfx long (which I am), as there have been many reports of boards failing and serious driver problems. However, a certain segment of the buying public was waiting for the TnT and not buying voodoo2's. Enough, perhaps, to keep inventory high enough (for retail and boardmakers)to keep from there being many re-orders for chipsets. I'm not sure how many weeks/months are needed to turn an order into a board and ship to a store, but 3dfx seems to be indicating that orders shipped in Q4 will be able to meet any xmas demand. These orders will not be placed in any quantity unless the boards sell out of the stores and orders from the stores remain strong. Demand for V2 will fade fairly quickly. It really is an upgrade option, not something for a new computer. Although xmas will spur more upgrades, I think that most of the current gaming community (I'm talking about the ones who play games like Quake) probably already own a V2 card. BTW - I hope that 3dfx has not been ordering more V2 chipsets as they already had plenty of inventory. I think that sales may be higher than the news release states and that there will be additional R&D expense (or COGS depending on their treatment) for the Banshee release plus more SG&A (more engineers and marketing). I like what I've seen of the Banshee as an OEM part - but - the TnT chip is better (in some ways) and may capture the high-end market. Once the banshee starts to sell, the death of the high-end add-on market will begin. 3DFX may end up with 2 main products next year - banshee for the mid-to-low end systems and the next V2 (with 2d) for the high-end systems. Is there a silver lining or two? Well, this bad news will drive another stake in the heart of any IPO release by nVidia and the very low price for 3dfx may attract a buyer. Michael