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

To: Daniel King who wrote (7270)	9/16/1998 10:03:00 AM
From: Chip Anderson	Read Replies (1) \| Respond to of 16960

Here's the MF comments on TDFX last night: (http://www.fool.com/FoolPort/FoolPort.htm) ----------- Now 3Dfx (Nasdaq: TDFX) will post a money-losing quarter. Of course, one quarter alone isn't meaningful. Only years are meaningful. And 3Dfx has been anything but a dog when it comes to its business. It offers the best products in the industry and it has more contracts with game-makers, by far, than any competitor. What is concerning, however, is that in its hey-day the company is about to post a loss. If a company is losing money during its strongest period of growth (like Iomega and 3Dfx are), what will happen in slow times? Sure, this is a "slow quarter" for 3Dfx, but that alone is puzzling. Management knew that a seasonal slowdown would occur, but they're surprised by its magnitude. That's obviously not good. What would be good news, if true, is that reportedly high inventory at one major customer (3Dfx only has a few, one being Diamond Multimedia) caused much of the current problem. But also, 3Dfx's new Banshee product -- which represents lower margin sales -- is reportedly eating into top-line Voodoo2 sales. That's a problem that was at least partially predicted. 3Dfx is now trading $1.50 above its book value, but impending losses don't stack the cards in book value's favor. Book value could follow in the footsteps of M.C. Hammer -- quick rise, quicker fall. Even though management is claiming that the fourth quarter will be profitable, that's predicated on strong holiday sales and new OEM revenue (OEM, or original equipment manufacturer programs are ramping now, but these, as with Iomega, represent lower margins). ---------- Chip