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

To: Eric Howard who wrote (8263)	10/15/1998 6:29:00 PM
From: Michael Linov	Respond to of 16960

We'll find out more on the conference call, but inventory writeoffs might all be a part of the numbers. One can't help but wonder if Diamond was single handedly responsible for most of the shortfall?

To: Eric Howard who wrote (8263)	10/15/1998 6:30:00 PM
From: Sun Tzu	Read Replies (1) \| Respond to of 16960

When I asked 3Dfx if the falling card prices has chewed into their margins, they answered no. The falling prices are due to the collapse of memory prices and that V2 margins are down only by ~5% are predicted. The falling memory prices is also what they alluded to in their "power of 2" campaign announcement. I think we should exclude the R&D costs for this quarter and the last quarter and see how the margins hold then. ST

To: Eric Howard who wrote (8263)	10/15/1998 7:43:00 PM
From: Rob Cavese	Read Replies (1) \| Respond to of 16960

The drop in gross margins is misleading: 3Dfx produced V2's in mass quantities back in the beginning of the year and it's possible that they're selling those same chips today. The fact that they use FIFO inventory accounting while both prices of V2's and raw materials have come way down depresses gross margins. In other words a V2 produced today and sold today probably still has a margin of >40%. But a V2 produced 6 months ago (when component prices and production costs were higher) and sold today (when prices on V2's are lower) will obviously have a much lower margin. It's not indicative of anything other than they overproduced and are now writing down inventory to be in sync with current prices.