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

To: Patrick Grinsell who wrote (10214)	1/24/1999 1:05:00 AM
From: Patrick Grinsell	Read Replies (2) \| Respond to of 16960

Why 1Q99 will be a good one for 3dfx... The April 1 ship date for Voodoo3 has me grinning ear-to-ear and I'll tell you why. It's all a matter of timing and I doubt the investing public will be smart enough to catch on here. Here's my little theory... To meet the April 1 ship date, STB must receive all shipments of Voodoo3 in Q199. Here's the cool part; this is really just a shift in overall inventory of the combined 3dfx/STB unit. Say 3dfx decides to produce one million units for the quarter and then TELLS STB to buy every last chip. Hell, it could be two million if 3dfx really wants. The higher the better. In this manner, 3dfx can actually "create" whatever earnings number they want. It gets better. You'd figure that STB's inventory will show really high because of this for the period ended 3/31/99 right? Wrong. STB has odd quarters and the next quarter for them is due to close 1/31/99. STB will then NEVER have to report independent inventory again as they will be part of 3dfx by the time 4/30/99 (their next fiscal end period) rolls around. Their new fiscal quarter should line up with 3dfx instead and the initial Voodoo3 should all be long gone by then. Here's an interesting side-effect. What will 3dfx price Voodoo3 chips at? A higher price to STB will mean a lower gross margin for Q2 but higher earnings for Q1. The bottom line is 3dfx can use Voodoo3 price and shipment quantities to dial in whatever kind of earnings they desire for Q1. Pat P.S. I like the pricing on the V3 2000 and 3000. They look to be right in the sweet spot. Even better, if we assume that the 2000 and 3000 have the same cost base (after all they are almost identical with two different clock speeds) gross margins on the 3000 will be 30% higher than the 2000. (Actually I think the 3000 will be a couple dollars more because of the RAMDAC. GM for the 2000 at 20% and GM for the 3000 for 45% feels about right...and that's at the board level!!!) P.P.S. Gads...what if they sell 1M Voodoo3 at that 45% GM! Pat