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

To: Sun Tzu who wrote (10329)	1/28/1999 12:45:00 PM
From: Sun Tzu	Read Replies (2) \| Respond to of 16960

From a research report on CREAF: Longer-term prospects for 3D graphics remain uncertain. The acquisition by graphics chip manufacturer 3Dfx (TDFX.US, US$15, not rated) of add-in board manufacturer STB Systems (STBI.US, US$9, not rated), announced in December 1998, creates uncertainty about the long-term prospects for Creative's 3D graphics business. Creative is a board manufacturer of 3Dfx's Voodoo and Banshee 2D/3D graphics chips, and, therefore, the acquisition of a Creative competitor by 3Dfx brings into question the relationship between Creative and 3Dfx going forward. 3D graphics board revenue as a percentage of Creative's total revenue was 9% in the first quarter of fiscal 1999. Creative has considered domination of the 3D graphics market to be one prong of its three-pronged strategy to retain its dominance in the multimedia market (the other two prongs being audio/speakers and DVD, each of which are addressed below). The entrance of 3Dfx into the add-in board market creates uncertainty as to whether Creative can persist with its strategy to dominate the 3D graphics add-in market. Shortly after 3Dfx acquired STB, Creative reduced its 6.5% stake in 3Dfx, purchased just three months previously, to 3%. We estimate that Creative made a total profit of US$4 million from the sale of its stake in 3Dfx, which we have included in our earnings estimates. Table 1 Global Comparison: Multimedia Players 1999E* Price/ Growth/ Company Key Products P/E Sales P/E* Creative Tech. Audio, board 9.9 1.1 -0.3 Diamond Graphics, board 14.2 0.6 0.3 ATI Tech. C$23.85 Graphics, chip 23.1 4.9 2.9 3Dfx Graphics, chip 22.7 5.3 NM 3D Labs, US$5 Graphics, chip 16.7 1.1 1.0 ESS Tech., US$7.88 Audio, chip 39.4 1.3 -0.7 * Note: 1999 P/Es are calendarized; Growth-to-P/E ratio is based on two years' forward earnings estimates for comparison purposes. Note: The bold face is that of the firm and not mine. Also note that from Wall Street's perspective, TDFX is not cheap compared with ATI or 3D Labs. This firm does not follow 3Dfx and they have no estimates on their future. Still, it is good that 3Dfx is showing up on their radar. They are the most influential firm on the street. regards, Sun Tzu