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

To: timbur who wrote (8356)	10/16/1998 12:26:00 PM
From: Sun Tzu	Respond to of 16960

nVidia and a good chunk of the graphics market are dead for these reasons (note some of these reasons apply to 3Dfx as well, but 3Dfx is strong enough to be injured but not killed by them...and whatever doesn't kill you, makes you stronger). First and foremost lack of capital. nVidia needs a lot of capital (more than it can get) because this is a highly competitive business and they need to invest in expensive leading technology. Because they are now fighting 3 law suits from SGI, S3, and 3Dfx and the legal fees are not low. Because they only have one viable product i.e TNT which competes with an established name 3Dfx, so I doubt they can maintain good sales momentum especially with the SLI campaign and the deals that 3Dfx has struc with ERTS, EB, and B&B. Unfortunately they have so much trouble and the market is so rotten these days that they don't have a snow ball's chance in hell to go public. I say unfortunately because if they did go public I could make a ton of money by shorting them (and I am not influenced at all here by my position in TDFX. I often go long a number of competing companies at the same time). Their OEM position is not as strong as you may think; They are not built into the motherboard like ATI. They are an option. Which means they are still volnurable to competition. Nor can they achieve any great margins from OEM sales so the issue of funding still remains. I don't see a large customer desire for nVidia either. TNT is suitable for high end gaming only (yes I know I can use it for word processing, but why would I). Unfortunately for nVidia, 3Dfx has beat them to the high end gaming market. Most die-hard gamers have a Voodoo2 already. I think 50%~80% of them will chose to go SLI for 40% less money than buy a TNT and throw away their V2 (glide may tip the scales slightly here). Those who are just entering the high end market will choose between a $200 SLI or a $140 TNT. Some will choose one over the other, but in short, I don't see a great demand for TNT. All in all, not much income, poor balance sheet, and high expenses, go a long way to kill them. Sun Tzu