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

To: Obewon who wrote (8318)	10/16/1998 1:53:00 AM
From: Sun Tzu	Read Replies (2) \| Respond to of 16960

1) 3Dfx admitted that they screwed up by not monitoring the channel and retail sell through. They are spending more money now to ensure the problem is not repeated. Sh!t happens. But in stock market that is not very important, so long as you give the impression that you'll be constipated for quite some time :D 2) Banshee is selling much better than expected. This makes me wonder if we are not seeing overselling into the channel much like the Voodoo II in 2Q98. I don't think so. For one thing, OEMs should be getting the first priority and the retail shelves are empty. 3) No major OEM deals announced. (I'll believe it when I finally see them announced.) I will personally sue them if they don't materialize I have it in writting from them that they have several (how many is that again?) OEM deals signed and are just waiting for them to announce it. 4) Inventory writedown - good idea considering it is unlikely that the company can profitable add the additional texel unit to the Voodoo 1.5 chips. See my rather long post on the write down. 5) Voodoo II sales going into 4Q98 - Christmas will help but it is the price reduction that will drive sales. Diamond cut their own throat but refusing to lower their prices inline with Creative and others. It will be interesting to see if Diamond will buy any 3Dfx chips in 4Q98, but I suspect that they will probably atleast triple their orders from last quarter now that they have drawn down inventory of high cost finished boards buildt in 2Q98. Making an estimate, I'd guess that Diamond will buy about $6-$7M in Voodoo II chips in 4Q98. As far as I'm concerned the lower prices are great for 3Dfx. The prices are down due to memory (and I suspect assembly) costs. Not because of drops in Voodoo chips. Based on my guestimates, 3Dfx should ship 700,000 to 1,000,000 units in Q4. ASP should drop to $35 and average cost per unit should be about $25~$29 say $28. So gross profits should be $5 Mil. to $7 Mil. which with a 27% tax rate (stated in CC) should give a net profits of 3.7~5 mil. or EPS of 19~31 cents. This is still damn good return on investment So I see plenty of up side, if the market acts rationally (see my profile for more info on market rationality :D) 6) Nothing said about new nVidia lawsuit - not good! If 3Dfx thought they had a clear winner here, they would be going to court immediately and asking for injuctive relief to stop nVidia from selling the TnT. nVidia is their ONLY rival with performance that is even close. Winning the battle a year or two from now won't mean much if TNT sells well resulting in lost sales for 3Dfx and deteriorating sales and financials. Nothing was asked! Their lawers may have prevented them from commenting on this as well. Also, you cannot be sure that if the case is won a year or two from now it is any worse than an immediate injunction. Case in point, many years ago, Polaroid sued Kodak over its instant camera patent violation. When they finally did win the case, among other remedies, the judge ordered Kodak to "remove" from the market all the instan camera's that it had sold. Kodak actually ended up having to advertise to people to bring back their camera's and get their money back. This in itself was worse for Kodak than anything else the Judge ordered. 7) Nothing mentioned about new ad campaign... If I remember correctly, they did mention it sufficiently. 3Dfx is not an articulate company as we all know. Best of luck Sun Tzu

To: Obewon who wrote (8318)	10/16/1998 3:59:00 AM
From: Simon Cardinale	Respond to of 16960

nVidia lawsuit: 6) Nothing said about new nVidia lawsuit - not good! If 3Dfx thought they had a clear winner here, they would be going to court immediately and asking for injuctive relief to stop nVidia from selling the TnT. nVidia is their ONLY rival with performance that is even close. Winning the battle a year or two from now won't mean much if TNT sells well resulting in lost sales for 3Dfx and deteriorating sales and financials. Not necessarily. That would really look draconian, and 3Dfx's image in the industry is important. Compare the backlash against the lawsuit as it stands now, and think of what it would be like then. Besides, it would have to be a very clear cut case indeed (unlikely in a high-tech case like this) for a judge to effectively put nVidia out of business based on an accusation. If nVidia had a dozen chipsets maybe he'd do it, but with only two? Where's it filed anyway? Santa Clara? I'll be in San Jose with time on my hands Monday. Maybe I'll swing by the county courthouse. Or was it in San Francisco? I could do that any old time... Simon