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

To: Sun Tzu who wrote (8931)	11/11/1998 7:42:00 PM
From: Patrick Grinsell	Read Replies (1) \| Respond to of 16960

I expect 3Dfx to have revenues of 55~65 million this quarter. Do you want to discuss a model for the earnings? Using the KIS principle, 55M-65M is just about right. Last quarter had 23M V1/V2 and 10M Banshee. Since we got about one full month of Banshee last quarter, the easiest estimate is to say about 30M (3x) for this quarter. I am assuming there is a supply constraint so I would be hesitant to go beyond that. If they did 23M in Voodoo2 last quarter I don't see any reason why they can't do at least that this quarter given that the channel for V2 was essentially flushed out last quarter. That gives a total of 53M for the baseline. I would put GM around 37% because most of the Banshee costs should be front-end loaded. Also, without the write-off last quarter margins would have been 38% which management says if largly a result of economies of scale. (Smaller number of units produced relative to fixed costs.) In addition, I would expect at a minimum that Banshee pricing is flat due to high unexpected demand and give it a good chance for a slight increase. Also, I would expect price reductions at TMC. For these reasons, the margin pressures from slight price decrease in V2 and the shift to the lower margin Banshee should be mitigated. Factors which could give potential upside: 1) Large ordering of V2 products could result in another spin of V2 TMU's putting that 4.5M written-off last quarter back into the mix. This would add about 8% back into the GM for the quarter. (Note that I don't expect this to happen.) 2) Banshee production is higher than expected. Word is that this is exactly what's happening. 3) Proactive cost containment action from last quarter (per management) comes into effect this quarter and SG&A is actually reduced. My expectations are for SG&A to remain flat from the last quarter because of this. Hoping for an actual reduction may be asking for a little much. Pat