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

To: Sun Tzu who wrote (9815)	12/21/1998 2:53:00 AM
From: Patrick Grinsell	Read Replies (1) \| Respond to of 16960

I also understand that if* 3Dfx can sell its cards to the retail successfully then it stands to benefit greatly.* Did nVidia just win an injunction against 3dfx? What do you mean if? Based on what I've gathered from STB, on average they sell their boards for $88 and make $3.56 in profits on them. Which was 80% OEM revenue, which will have smaller margins. Average price for Diamond's Q2 Voodoo2 was about $160-$170 to the retailer by my estimations. I don't think their profit margins (as a division of 3Dfx) will improve just because they are getting the chips from 3Dfx internally instead of buying it from them. Well I'm thinking your thinking is dead wrong. Banshee is a perfect example. If there was only one vendor, Banshee would be around $150 instead of $100. 3dfx said as much. The revenue might decline 10%-20%, but the profit margin would about double. (Actually, since 3dfx is sold out this quarter, revenue probably wouldn't decline at all.) Implicit in your assumption was that overnight in '99, 3Dfx will have revenues equal to 75% of ATI's (allowing for currency effect). I implied nothing. I just took half of the total revenue volume from both companies for this. If it comes to a number that doesn't sit right with you, maybe it's because you're looking through the tinted glasses of someone who just sold after the announcement. Somehow I don't think going from a niche player to a very strong number two contender in the industry in 9 months is likely. If 3dfx has truly done 800M-1B in board sales this year, I don't think that makes them a niche player...do you? As a matter of fact, I think it's about time 3dfx quit letting others reap profits from their technology while adding very little value to the process. Assume that all those cards will be 3Dfx cards and allow some extra percentage for the benefit of not having to compete with others for the 3Dfx brand and selling to the public. You are suggesting that we base revenues entirely on STB's sales? There's one main reason why I think that won't work: STB is 80% OEM. That will change now that they will be the only source for 3dfx chips and is one of the reasons for the merger. By basing your numbers on STB you assume that 3dfx will either drop the majority of the retail sales or won't be able to make the retail sales for one reason or another. Potter: I didn't figure in goodwill. How is goodwill factored into the merger? FYI, actually STB said earnings neutral was the worst case scenario.