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Technology Stocks : ATI Technologies in 1997 (T.ATY) -- Ignore unavailable to you. Want to Upgrade?

To: Marc who wrote (2982)	4/1/1999 12:07:00 PM
From: Stocker	Read Replies (2) \| Respond to of 5927

From Individual Investor(not sure that I buy it though): Stock of the Day Mar 29, 1999 NVIDIA: 3-D PC for You Analyst: Will Frankenhoff Coming to a PC near your desk: 3-D graphics. According to Mercury Research, by 2001 3-D graphics will be standard in every PC. The result: Sales of 3-D graphics are expected to swell from 4.9 million units in 1997 to 138 million units in 2001. The reason for this enormous surge in demand: PC makers such as Dell Computer (NASDAQ:DELL - news) and Compaq Computer (NYSE:CPQ - news) are forever seeking ways to differentiate their products by offering extra stuff many people don't need. The company best positioned to take advantage of this rapidly growing market is NVIDIA (NASDAQ:NVDA - news) , which designs the high performance 3-D graphic processors but doesn't actually make them. The company went public in January at $12 per share and jumped $7.69 to $19.69 in its first day of trading. But the stock is currently trading around $19.25. Why is NVIDIA more attractive than competitor ATI Technologies (NASDAQ:ATYT - news) ? The continued strength of NVIDIA's flagship RIVA product line and the fact that NVIDIA has shown the ability to introduce cutting-edge products more quickly. The RIVA product line includes the RIVA TNT processor, the RIVA 128ZX and the RIVA 128 processor, all introduced since 1997. Building on the strength of these products, NVIDIA has become the preferred design at seven of the top 10 PC makers, including Compaq, Dell, IBM (NYSE:IBM - news) , Packard Bell and Gateway 2000 (NYSE:GTW - news) . In addition, the company is the preferred design at six of the top eight add-in board manufacturers, including Diamond and Creative Technologies. Finally, NVIDIA is preferred by INTEL, which ships NVIDIA's RIVA chips as part of an integrated motherboard solution. While this embedded base of customers is impressive, so is NVIDIA's ability to rapidly introduce new products, like its recently released RIVA TNT2 processor, which has the ability to handle graphics at twice the speed of the earlier TNT version, which was launched just eight months ago. Also impressive: In an industry where constant evolution is the norm, (Moore's law states that the number of transistors per chip effectively doubles every 18 months), NVIDIA's original TNT product shipped two quarters before ATI Technologies' comparable product and has since followed through with the RIVA TNT2 processor, which shipped a month before analysts expected it to. Indeed, in recent months the company's R&D operation has finally been seeing the fruits of its labor. Revenue for the fiscal year ended January 31, 1999 was $158.2 million while net income was $4.1 million. Financial comparisons are difficult, though, since the company changed its fiscal year-end. A look at the fourth fiscal quarter ended January 31, 1999 is more meaningful. In that three-month period, revenue swelled 179% to $65.5 million as strong demand for the RIVA TNT processor boosted sales. Earnings of $0.27 per diluted share represented a 350% gain over last year's period as the company also reported improvement in both gross and operating margins. Thanks in part to the IPO, NVIDIA's balance sheet is pretty solid with $50 million ($1.74 per diluted share) in cash and equivalents and no long-term debt. One note of caution: The 3-D graphics business is extremely litigious and NVIDIA suffers just the same as the rest of the industry. Currently there are three separate lawsuits against the company claiming patent infringement filed by competitors SGI, S3 and 3Dfx. As in any lawsuit, an adverse ruling would hurt the company. Still, for a high-flying niche tech company, the stock does not seem to be outrageously priced. Its shares are trading around $19.25, not much above where it closed after its first day of trading and and less than 25 times this fiscal year's earnings estimate of $0.78 per share. Bottom Line: NVIDIA is poised to grow rapidly over the next 12-24 months thanks in large part to the strength of its products, especially the recently released TNT2 product, the fact that it has proven itself quicker than its competitors in introducing new products and the fact that it outsources production of the chips it designs.