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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: JRH who wrote (610)	3/1/1999 11:52:00 PM
From: mariner	Respond to of 54805

Justin I hope I didn't come across as waiving the flag for ATI. Was more of a throw in due to the Intel link I provided. That said, while I'm not an expert in the graphics field, ATI is doing remarkably well there. You're correct that the low end graphics area is pretty much commoditized (is that a word?). ATI seems to be doing much better than most in this area, taking market share and growing revs/earnings at an impressive rate, in spite of the intense competition, short product cycles and diminishing pricing power in the segment. Why? I'll offer a couple of reasons. 1/ATI seems to be very focused on OEM contracts, and doesn't seem too concerned about marketing itself to death to get the odd gamer to buy their cards. They go after the DELLs, CPQs etc so that their cards are the original equipment installed. 2/ATI makes both the chips and boards while I believe most competitors make only one or the other. Believe this enhances design and production efficiency. 3/CEO is a bit of a visionary. Seems to have that rare quality which allows him to see further out than others. ATI going hard after the "set-top box" market for cable/internet convergence is an example. He made the Business Week Top 25 CEO list in 98 by the way. At end of the day, I agree they'll likely not be a gorilla. I suspect no one will in that market segment. But, (and I warned yesterday that I haven't had an opportunity to read the thread users manual yet), can an exceptionally well managed company not become a King, even if the market space does not allow for a Gorilla? That's why I suggested it might be worthy of consideration for the Watch & Wait portfolio - an idea generator who's fate I leave to the wisdom of you and the thread.

To: JRH who wrote (610)	3/2/1999 11:44:00 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Justin, I nominate Siebel Systems (SEBL) to the W&W portfolio. It's the fastest growing software applications company in the history of that biz. It has all the makings of a potential gorilla (including the high stock price!). And it is by far the strongest (by any measure) of the independent front office software companies with which it competes. --Mike Buckley

To: JRH who wrote (610)	3/3/1999 12:06:00 AM
From: Chadick	Respond to of 54805

Justin, Mike I second the nomination of SEBL to the W & W portfolio. I have Siebel on my own watch list. The CEO has what it takes. Fred

To: JRH who wrote (610)	3/10/1999 5:42:00 PM
From: Frank Walker	Read Replies (2) \| Respond to of 54805

ATI Technologies (NASDAQ: ATYT or TSE: ATY) was suggested as a Gorilla or King candidate a couple of weeks ago (#607) by mariner but it got rejected. I believe ATI is a King. They dominate the mainstream PC graphics board market, selling mostly to OEMs like CPQ/DELL as well as retail upgrade card buyers, and also sell graphics chips to motherboard makers. ATI is also starting to make graphics chips for digital cable TV set-top boxes. So are they in a commodity industry? It is easy to dismiss computer parts as commodity products. However, some companies can build in features that people want to buy, and produce this stuff very profitably. ATI's gross profit margin is 37% and has been steadily rising. Unlike some of the other PC graphics companies, these guys know how to make money. Here is the 5 year revenue / income / eps history for 1998 to 1994 Aug 31 (Cdn$): sales 1156m 603m 467m 360m 233m incm 168m 48m 27m 16m (3m) eps .79 .24 .14 .09 (.02) Q1 1999 showed about a doubling in sales and income over 1998, Q2 1999 results will be out within a few weeks and my guess is the trend continues. Recent stock prices of $22 Cdn for ATY.TO ($14.50 US for ATYT) indicates a trailing P/E of 28 for 1998. Market cap. is about $4.4B C$ or $3.0B US$. No debt. Starting with Q1 1999, financial results are also reported in US$. The P/E is low, considering ATI's consistent and high growth rates, because the company is not well known, and in King/Prince fashion there are nagging fears about competing graphics cards and chips, and future Intel microprocessors taking on graphics functions. Also last year they bought Chromatics Research and this will be a minor financial burden for a while. My guess is that the worries about Intel microprocessors are exaggerated, since graphics technology is rapidly evolving and therefore not well-suited to the main processor. The ATI IPO about 5 years ago was overpriced and some investors got burned with a big drop in stock price, but that seems to be out of the way. The first of ATI's new 128 bit graphics cards are now shipping and getting good reviews. ATI aims for the mid-range graphics card market, where there are large volumes and good profitability. But their newest cards are now fast enough for serious PC game players. ATI website: atitech.com S.I. thread: Subject 10989 ATY.TO news: quote.yahoo.com ATYT news (same?): quote.yahoo.com Q1 1999 news: biz.yahoo.com - ILikeGorillas (and Kings / Princes too)