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

To: Patrick Grinsell who wrote (9818)	12/21/1998 3:38:00 AM
From: Sun Tzu	Read Replies (1) \| Respond to of 16960

Hey Pat, why all the hostility I sense in your tone? Whether or not I have a position in a stock has no bearings on how I analyze it. The bulk of the argument I'm hearing from you is that 3Dfx has had sales in excess of $800 million and as such it should do very well going forward. I just don't see it that way. The sales were those of Diamond, Creative, Guilemot, and other card makers. They hapend to use 3Dfx chips and the choice of the chip-set did have a bearing on the sales, but that does not change the fact the sales were their's. The PC industry has astronomical revenues. But I don't think that if Intel bought a few board makers and decided to only make itsown computers it could compete with Dell, IBM, and Compaq combined (assuming for the moment that there was adequate supply of AMD chips lying around). Just as selling to OEMs was not as simple as saying "hey, we are the leading brand...we have good retail presence...so you should buy all our chips" selling in retail is not going to be as easy as saying "you sold cards that had our chips in it...we have OEM contracts...so stuff your shelves with our cards". As I see it, 3Dfx has just greatly improved its OEM presence, and at the same time has lost a huge chunk of its retail presence. There is a lot of distribution, support, marketing, and logistics involved to sell to so many retail stores which neither 3Dfx nor STB has had a lot of experience with. In addition, they will have to prove to the big chains that they can deliver the goods in a satisfactory manner before they are even given a serious presence on the shelves. Based on management's statements, the merger will be neutral to slightly positive (to EPS). That means fiscal EPS of $0.69~$0.75. For you to triple that number, via whatever method, you will have to bring more evidence than just half of this plus half of that kind of numbers. This has nothing to do with what I have done with my shares, it is what logic (and apparently the management) tells me. Cheers, Sun Tzu PS A neutral EPS, implies a 50% increase in profits due to the increase in shares outstanding.