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

To: Sun Tzu who wrote (9784)	12/18/1998 11:51:00 AM
From: Don Westermeyer	Read Replies (1) \| Respond to of 16960

Does anyone here follow ATI Tech (ATY.TO on the Canadian exchange)? I'm interested in what kind of valuations that company gets relative to sales and book value. Thanks in advance. Don

To: Sun Tzu who wrote (9784)	12/18/1998 11:53:00 AM
From: Sun Tzu	Read Replies (1) \| Respond to of 16960

Off topic but interesting to note for technophiles. nbnn.com enjoy, ST

To: Sun Tzu who wrote (9784)	12/18/1998 9:20:00 PM
From: Patrick Grinsell	Respond to of 16960

Okay Sun, I'll attempt to answer your questions. They probably aren't the only answers, or the best, but they're all I got. ;-) (a) will major retailers be willing to buy from STB in the same way they did from others? Willing? Yes. These guys will always stock stuff that sells. That isn't the issue. The real issue is whether STB will be in all the places that Creative and Diamond are. From my web-browsing and shopping experiences, it appears that STB products will be sold at most of the same high volume places as Creative and Diamond. There will be some loss of sellthrough because the coverage won't be 100% of what it was. (b) to what extent will the public avoid/delay purchase due to the relatively unknown name of the cards (and don't tell me that no one cared about the creative or diamond name; some people did)? Back in the Voodoo1 days I would guess there to be about a 30%-40% loss. The Monster brand was really strong. With the advent of Voodoo2, I would guess the range to be about 10%-20%. You are implying that 3dfx is an unkown brand name. 3dfx is a really strong brand name at retail, which is one of the reasons why the merger makes so much sense. I'd be curious to know if the person on the street were asked about Diamond, Creative, and 3dfx which would they know. (c) how in the world will STB be able to ramp up production and support to even come close to the existing volumes? They have plenty of capacity in their Mexico fab. STB has stated that this higher utilization of existing fabs will bring down the fixed costs as a percentage of volume. This should cause margins to increase. Once again, this is another good reason for the merger: economies of scale. (d) Europe is about 50% of sales. Who will represent and distribute 3Dfx cards there? I don't think STB has much of a presence there. STB is a major European player on the OEM side because their Tier 1 customers are major players globabally. Retail well...I heard that Guillemot may still be on board, but I haven't heard anything publicly. You're point here (at least in retail) is valid. (e) I've heard a lot of comment about how great the retail sales have been. IMO, to good extent that was because Voodoo2 was rather unique and there was not a closely competing product. I can't say the same for Banshee or Voodoo3. Actually you're scenario is too simplistic. If lack of competition means anything they should have made billions on Voodoo1. The advent of more advanced 3d software has enlarged the whole market, not just 3dfx, and that looks to continue. Most people on this board probably think Q3A will have the largest effect on sales as far as any one game goes. I'd disagree. Diablo II and Everquest will have a far greater impact because a whole new group of game enthusiasts will be brought under the 3d umbrella. It isn't about selling to the same group of FPS geeks, it's about reaching the masses. Voodoo2 wasn't really unique. It was just a fast multitexturing Voodoo1. That said, however, Voodoo2 was an upgrade solution for those people who didn't have sufficient 3d. Back then that was just about everyone. Going forward the need for an upgrade will be diminished as the current lot of 3d cards should be very 3d capable. For Voodoo3, that net effect of increasing overall demand with decreasing upgade demand will probably be swayed by market acceptance. Given Banshee retail sellthrough I don't see any problems. ...oh, and Rampage will be a goldmine. If it does what I think it'll do I'd be willing to pay $600. Too much? Tell that to everyone who bought SLI when Voodoo2 first came out. (f) Are there any out clauses in this merger and if so what are they? From what I gather from the STB conference call, STB pays a stiff penalty for backing out. 3dfx pays no penalty. STB management has stated that they are fully committed to this and there are no "weasel" words in the contract. It's no surprise considering all the burnt bridges behind both organizations. (g) All my previous questions with regards to revenue growth and marketing game plan still remain unanswered. Revenue growth? 3dfx has it's strength in retail and STB in the OEM market. For OEMs that are inventory turns anal (Dell and Compaq), the deciding factor may be STB's unique distribution with the acutal product being merely an afterthought. STB will now get to reach into the retail market without having to compete on price with everybody else. The lack of overlap makes for nice revenue potential. Marketing??? Got me. Haven't heard anything yet. Pat

To: Sun Tzu who wrote (9784)	12/19/1998 10:04:00 PM
From: Michael G. Potter	Read Replies (1) \| Respond to of 16960

STB would have a little bit of trouble supporting the total 3Dfx retial market right now and their OEM sales as well (if they converted everything 100% to V3). However, they do have excess capacity now (from their last few earnings releases) and it is some effort to transform a board line from one board to another, but it isn't all that difficult (mostly reprograming insertion machines). Michael ps - I've been super busy at work myself. I have the week after Christmas off and plan on doing a bunch of reading of STB SEC domuments and then try and come up with a new earnings model (and then Pat and I will go back and forth).