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

To: Sun Tzu who wrote (8270)	10/16/1998 1:04:00 PM
From: Sun Tzu	Respond to of 16960

I just posted this on a thread in MF. To give you some context, this comes as an answer to two statements: An aleged statement by a 3Dfx engineer (as well as someone else) that most of the graphics companies will die within 3 years. And a statement by TSC that 3Dfx had better join Sun Micro or National Semi next year or be one of those majority graphics companies that will vanish. Here is my response: ============ OK let's get a grip here and get back to the topic. This happens to be an area that I actually know something about. (1) I agree whole heartedly that 80% of those graphics companies will not be there. I've been saying this for a long time now. It's just that I see this as a positive for 3Dfx, because I see them as one of the 3~5 survivors, which naturally will end up with 10%~35% of a very big market. My reasoning is that most of 3Dfx's competitors are either in very poor financial shape and cannot survive for long, are technologically behind, or both. So 3Dfx will either own a good chunk of the market by itself or will merge with a bigger player. (2) The whole issue of Sun and NSM shows the lack of understanding of what 3Dfx as well as Sun and NSM do. Sun and NSM are companies that I deal with on day to day basis. Yes Sun is eager to get into the graphics business. But they want to put SGI out of business and are not interested in set-top boxes or game machines which is 3Dfx's forte. Their graphics machines are at a level that they don't really need a partner, but if they were to buy or partner with a Jr. graphics company, it would be 3D Labs and not 3Dfx. The problen at this level of operation is not so much the hardware, but the software availability and technical support. Neither of which are easy to come by nor can be bought. NSM's strategy is to integrate systems to the Nth level. In sofaras they want to created a computer (yes the whole computer) on a single chip, they may be interested in integrating graphics functions in their chips. They already have the technology they need in this area, and even if they did not, it is not feasible now or ever to place a high end graphics chip which itself uses 3~5 mil. transistors in the same die as another very complex chip (i.e cpu+mmu+dma+...). (3) Intel is not interested in graphics market, memory market, telecom market, or any other market beyond its core CPU market. The reason Intel invests in companies in those areas (as it originaly did in 3Dfx, and now is investing in E&S) is to create technologies that will require faster, newer CPUs. Otherwise, Intel is dead. There is a limit to how fast you need to do your spreadsheet, word processing, role playing games, or surfing the net. That limit has been reached with the existing Intel technology and Intel's competition is eating Intel's margins. So Intel tries to make sure that the memory bottle neck between slow memory bus and the fast cpu is reduced, by pushing the rambus technology (you have no idea how hard Intel is pushing) and when Micron refuses to support RDRAM, Intel invests in MU to make it do so (MU has not announced support for RDRAM yet, but mark my words, it will). And since you don't need a super fast computer to keep up with a 56k modem, Intel is supporting @home and cable modems. The same goes for graphics. Now this is where things can get ugly for 3Dfx. It is not that Intel wants a piece of the graphics market, but 3Dfx's idea to make graphics processors that are so good to breath new life into otherwise old or low-end PCs, conflicts with Intel's needs. Which is why IMO Intel withdrew its investment in 3Dfx. But as ugly as this battle may get, I give the odds of wining to 3Dfx, because in order for Intel to win this war, they will have to destroy all graphics card makers and not just 3Dfx. After all, every company always tries to come up with a better mouse trap. And a better mouse trap in this case means a faster more independent graphics card which includes a geometric processor. Ultimately intel will see this and decide that there are other ways to ensure continuing sale of high end CPUs. Just my opinion, Sun Tzu