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Technology Stocks : S3 (A LONGER TERM PERSPECTIVE) -- Ignore unavailable to you. Want to Upgrade?

To: stock talk who wrote (12648)	1/26/1999 10:14:00 PM
From: Synapsid	Read Replies (1) \| Respond to of 14577

I believe there is something peculiar about the design and production process of the original 0.25-micron Savage3D which greatly increases the cost of its manufacture; this is apparent from press releases and documents filed to the SEC . From the beginning S3 has been very clear about the fact that they were only targeting the high-end segment with the chip, as lower price points would not be cost-effective. Most design wins that the Savage3D has are probably best described as dumping of excess inventory below cost. As for the reason for the high cost, it's mainly speculation, but it probably has to do with the early stage of the 0.25 micron learning curve at which the Savage3D was released in the spring of 1998. The chip may have been designed with design tools ill-suited for the 0.25 micron process, and for process characteristics that do not match the current, mature high-volume 0.25 micron manufacturing process at USC. Talking in wafer terms, the Savage3D might be a very tough dish to cook (marinate for 24 hours, special frying oil etc). The Savage-4 had better resemble french fries and a coke.

To: stock talk who wrote (12648)	1/27/1999 4:10:00 AM
From: Don Earl	Respond to of 14577

Hi stock talk, The conference call mentioned that if they were to product both Savage and Savage 4, they would be basically competing with themselves. My impression was that both chips cost about the same to produce or possibly the Savage 4 may cost less. They're talking about targeting the upper mid to high end PCs with Savage 4 which is the same market Savage was supposed to fill. I've speculated, in my not so humble opinion, that Savage was released long before it was really a marketable product. One review I read on the Hercules Beast mentioned that Hercules was basically sorting through the Savage chips they were getting and picking out the ones that work. The unstated conclusion was that whatever production process S3 has been using isn't yielding a uniform, consistent product. Pretty good chance the $10 million charge was related to unusable chips that were returned. On hind sight, I wonder if that might account for the wide range of bench marks and conflicting opinion on the quality of Savage over the last 6-8 months. I'd also venture a guess that Savage 2 and 3 had the same problems. I assume that in Savage 4 they have found a process that lets them produce Savage cheaply, with good yields and uniform quality. Also, I've never seen any mention of the kind of heat problems with Savage that are written about with ATI products targeted at the same market segment. From what I've read, the high end ATI product get hot enough after 20-30 minutes use to damage parts around it. If OEMs have been getting a lot of defective PCs returned because of heat problems, the favorable response from OEMs S3 claimed in the CC may be justified. Intel was a $50-$60 million a year customer for S3 a few years ago and I think you had a good point in a previous post. I noticed all that beating around the bush, core logic talk in the CC also. The ANALysts pumped Potashner pretty good on this round. I think he was dying to spill the beans about deals with IBM and Intel. Too bad those things aren't televised, I would love to have seen the facial expressions that went with the comments. The down side is that we are looking at another lousy quarter. The ramp on the new chips is going to be expensive and there isn't going to be much in the way of revenue. They are going to burn some cash. The up side is that the public offering of USC should replace all the cash, and Potashner seems willing to keep investors informed of the companies progress. Should see some press releases that factor the turn around aspect into the stock price. I think he would do well to invite Eric Schmidt out for lunch though. Eric made some pretty good moves in his early days with Novell. Spent a lot of time working with the media and Novells customer base. S3 is in almost the exact same place Novell was a year and a half ago. Regards, Don PS Probably not the technical version you were looking for but I think it's the general idea.