Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Diamond Multimedia -- Ignore unavailable to you. Want to Upgrade?

To: wogger who wrote (4350)	5/1/1999 7:26:00 PM
From: wasteman	Read Replies (1) \| Respond to of 4679

I know this will sound like a stupid question, but will the RNWK announcement be positive or negative for DIMD? Although they are selling RIO's, they still aren't making any significant money. Is there going to be a link between Realnetworks and Diamond in the announcement? I have owned DIMD before and would like to get back in at the right time. Please help.

To: wogger who wrote (4350)	5/1/1999 7:31:00 PM
From: Mark Peterson	Read Replies (1) \| Respond to of 4679

Diamond Multimedia still relies on graphics business for profitability April 30, 1999 Diamond Multimedia still relies on graphics business for profitability By Michele Rosen NEW YORK. 03:55PM EST—Diamond Multimedia (nasdaq: DIMD) is set to announce new products Monday that will make or break the beleaguered company's results in the second quarter, according to CEO Bill Schroeder. Much of the news about Diamond lately has centered on its popular Rio portable music player, which uses the controversial MP3 compressed file format. Sales from that product, as well as the company's communications and professional graphics divisions, have been good. But Diamond still relies on its multimedia division, which makes graphics and audio cards for PCs, for the majority of its revenue, and that business has been hurting lately. "The PC peripheral business ended up dragging the Internet side of the company down last quarter," Schroeder says. Diamond posted first-quarter earnings per share of four cents, instead of the 14 cents analysts expected and down significantly from the 22 cents a share posted for the same quarter last year. Schroeder blames his company's failure to meet earnings-per-share expectations for the first quarter on lower gross margins in the multimedia division. "The commodity side of the business started to run into problems halfway through March. The industry slowed down and Europe slowed down and we had to take some pricing actions," he explains. Revenue was also down--$144 million, compared to $186.2 million for the first quarter of 1998. In this case, the problem was most likely caused by the launch of a new line of graphics cards from 3dfx (nasdaq: TDFX), one of Diamond's biggest competitors. This isn't the only problem 3dfx has caused Diamond recently. In December, 3dfx, which makes graphics chips, announced it would buy STB Systems, which makes graphics cards. Now that 3dfx owns its own graphics card manufacturer, it no longer sells chips to other companies. When Diamond stopped getting chips from 3dfx in February, its top-selling cards were both based on 3dfx's older Voodoo2 chips, according to industry research firm PC Data. "That put a discontinuity into the business," Schroeder admits. Diamond is getting ready to compete with 3dfx's new Voodoo3-based cards by releasing two new lines of cards based on competing chips--Nvidia's (nasdaq: NVDA) Riva TNT2 and S3's (nasdaq: SIII) Savage4 Pro. Schroeder points out that Diamond's new cards are faster than the currently available Voodoo3 cards from 3dfx. He also says that Diamond no longer has to compete as extensively with STB for contracts with original equipment manufacturers such as Compaq and Dell, because 3dfx focuses on selling cards to people who want to upgrade their existing computers. Although the retail "aftermarket" provides higher gross margins, 80% of graphics cards are sold in computers rather than as upgrades, he says. Although Schroeder has high hopes for sales of the new graphics cards during the summer, he admits that the multimedia division will probably never see the same revenue growth again as it did in the early- and mid-90s. "We are not looking at multimedia as, 'Gee, we've got to grow this business,'" he says. "We are looking at how do we manage it to be more predictable, more stable and more profitable." In the first quarter, the multimedia division accounted for 60% of revenue. Schroeder would like to see that ratio shrink to 50% as the company's other divisions grow.