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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: Fred Fahmy who wrote (12645)	11/4/1998 11:50:00 PM
From: BZOOKA	Respond to of 13925

3Dfx Pops Poison Pill by Ken Feinstein November 4, 1998, 4 p.m. PT Amid speculation that graphics chipmaker 3Dfx Interactive is a possible takeover target, the company has instituted a "shareholder rights plan" to make it more difficult for anyone to stage a hostile takeover. This so-called poison pill entitles 3Dfx to make stock available to current shareholders at a discounted price in the event that any person or group were to acquire 12 percent or more of the company's outstanding stock. This maneuver would make it difficult for anyone to acquire a controlling interest in 3Dfx without the company's consent. This announcement comes in the background of Creative Technology's recent acquisition of a substantial stake in 3Dfx. According to Creative's SEC filing of October 17, it acquired 988,100 shares of 3Dfx from September 8, 1998, through October 16, 1998, at an aggregate purchase price of $10,688,068 (about $11 per share). These purchases on the open market, combined with earlier holdings, brought Creative's share in 3Dfx to 6.5 percent. Creative had no comment as to whether these purchases have continued, or to what percent of the company it currently owns. When asked, however, 3Dfx representatives did not express concern over Creative's advances."It's a precautionary move more than anything else; we don't expect Creative to try to get a dominant share of the company and change its relationship with us. It's just a fiscally and legally responsible thing to do," explained Steve Schick, director of PR for 3Dfx. The stock price for 3Dfx has bounced back in recent weeks, coming off an all-time closing low of $8.8125 on September 15, following the company's preannouncement of lower-than-expected third-quarter earnings. Today 3Dfx closed at $14.25, up $1.25. News Analysis For years, Creative has dominated the sound card market by owning the core technology behind its products. With its acquisitions of Ensoniq and E-mu Systems, it has shown itself willing to purchase companies to get that technology, and a takeover of 3Dfx would fit into that pattern. It must be uncomfortable for Creative to find itself in the cutthroat, low-margin business of graphics cards, where its only way to compete is on price. The prospect of controlling 3Dfx must seem attractive: If 3Dfx could continue to produce technologically superior chips, Creative, as its only customer, could maintain high margins on its products without needing to worry about competition from Diamond Multimedia.