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

To: Joe C. who wrote (9848)	12/22/1998 12:24:00 AM
From: Marc	Read Replies (1) \| Respond to of 16960

3Dfx Pursues Mass Market with STB Buy Chip Maker Risks Retail Presence to Capture PC Design Wins -- Tue, 22 Dec 1998 00:06 EST Dec. 21, 1998 (MULTIMEDIA WEEK, Vol. 7, No. 50 via COMTEX) -- 3Dfx Interactive Inc. CEO Greg Ballard is willing to jeopardize his company's retail success to try and carve out design wins at the PC OEM level and take more control of his company's destiny. With graphics board sales to PC vendors outpacing those to the retail aftermarket by roughly nine to one, the company has good reason to pursue a broader market. By acquiring add-in card vendor STB Systems Inc. [STBI], the chip designer hopes to gain design wins with Dell Computer Corp. [DELL] and Compaq Computer Corp. [CPQ], PC companies sourcing boards from the Texas-based vendor, and become a leading supplier to Gateway Inc. [GATE]. The deal is expected to cost 3Dfx about $141 million in stock, with STB shareholders receiving .65 shares of 3Dfx common stock for each share of STB stock. Both parties expect the acquisition to close by March, at which time 3Dfx will cut off most of its current board- level customers. "STB has an intense focus in the OEM business, an area where we're weak," Ballard said. "I think 3Dfx by 2000 will be a more diversified company away from [just] the consumer market." In November 3Dfx inked a deal for the Banshee chip with Gateway through a board from Creative Technology Ltd. [CREAF], but the company has landed only a few design wins for the part, most with second and third-tier customers. STB's relationship with top PC vendors in the second half of 1998 has come in large part because the company sourced Nvidia Corp.'s Riva TNT. It's also too soon to tell if STB boards with 3Dfx silicon will carry as much weight with PC OEMs as the Nvidia offerings. "The OEMs pick the chip first and the board second," said Dan Vivoli, Nvidia's vice president of product marketing. "3Dfx needs to build a part the OEMs want." Misguided World View? Through the acquisition Ballard also seeks more control of his company's destiny by determining the bill of materials at the silicon and board level. 3Dfx will continue to supply current customers with silicon until the company ships Voodoo3 early in the second quarter, after which it will continue to work with "a handful of companies that fill in gaps in Asia and Europe," Ballard said. If he follows that plan, Ballard likely will lose the pricing control he seeks. Those boards are bound to end up back in the U.S.- at a price lower than STB boards which 3Dfx will then have to match- throwing any "command" over a pricing strategy out of whack. Even if 3Dfx successfully moves into PC OEM circles through the acquisition, its foothold may come at the expense of the retail business that gave the company its cachet among the PC gaming crowd. STB has a weak retail presence compared to Diamond Multimedia Systems Inc. [DIMD] and Creative-3Dfx's top two customers accounting for 60 percent of the chip company's revenue. Officials from both those companies showed no trepidation about the impending merger. In fact, Creative officials are not impressed with 3Dfx's upcoming Voodoo3 offering (MMW, Nov. 23), due out in the second quarter of 1999. "We didn't really want to integrate it into our road map," said Steve Mosher, Creative's director of graphics marketing. He described the chip as limited in terms of memory with support for a maximum of 16 MB RAM and said it offers poorer image quality than some prototypes he's seen from competitors. Creative officials also are less than enchanted with 3Dfx because of pricing policies that cut into the board supplier's margins to a greater extent than those from other silicon providers. Creative Sells 3Dfx Stock Creative's Bermuda subsidiary CTI Ltd. purchased a 6.5 percent stake in 3Dfx for about $10.7 million in stock in the third quarter of this year. On Dec. 14, the day the STB acquisition was announced, Creative sold 544,2000 shares at $13.95 each, bringing the company's ownership to 3 percent. The STB acquisition will force Diamond to look elsewhere for the silicon on high-end boards. Since Diamond sources graphics chips from more companies than any other retail board supplier, however, it's unlikely 3Dfx will be a significant loss. (STB, 972/234-8570; 3Dfx, 408/935-4400) -0- Copyright Phillips Publishing, Inc. I thought it was interesting. Marc

To: Joe C. who wrote (9848)	12/23/1998 7:56:00 AM
From: Paul A	Read Replies (1) \| Respond to of 16960

yeah, the small caps had another horrible year.. boy! Eventually all this internet fluff has to come to an end, but you cant ignore it while its happening.. I have noticed TDFX coming up on more and more peoples 'radar' screens which cant be all bad.. I am looking once again for a re-entry point but from the looks of it, the few days I have off for the holiday will be spent in part trying to get up to speed with what this company has/hasnt done.. its good to see you still here Joe C.! One day im sure it will pay off, its just gotta be frustrating for the time being...