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

To: Ram Seetharaman who wrote (4389)	5/13/1999 6:03:00 AM
From: Sanjay Varma	Read Replies (1) \| Respond to of 4679

Do you have a short-term price target for DIMD? I used to own and was thinking about buying back but the only good news I can see on the horizon is hype about RioPort. Seems like modems and graphics cards will be perpetual break-even products. thanks, Sanjay Varma

To: Ram Seetharaman who wrote (4389)	5/14/1999 11:12:00 AM
From: kha vu	Read Replies (2) \| Respond to of 4679

techstocks.com R. Kaiser is an individual investor and an Internet Financial Connection reader. He provides the following commentary on Diamond Multimedia (DIMD 5 1/8). Below is his write up. Diamond Multimedia (NASDAQ Ticker DIMD) is an extremely undervalued Internet related stock. It is currently traded under $5 a share, well off its 52 weeks high of $10 a share. In the past several months, it was traded between $6-$10 a share, and seemed to be poised for a major upward movement, until it took a beating because of disappointing first quarter earnings. A close look at its earnings and revenue reveal however that Diamond Multimedia has more potentials than ever. Indeed, the major new play here for Diamond is the Internet. In many ways, Diamond is fast turning into an Internet company. The traditional core business of Diamond is multimedia, namely graphic and audio cards. Diamond is well-known for its leading products, but was plagued for several years by problems in inventory control and price competitions. Last year, it underwent an important restructuring which streamlined its inventory structure. At the same time, it began to enter the Internet arena along two venues. The first is Internet music, the second is Internet connectivity. Last October, Diamond introduced the Rio, the first Internet music player, and made quite a splash. By now, Rio has established its leading position and the second generation Rio will be launched in June. Diamond has organized its Internet music business into a division Rioport.com, which produces Rio and manages the Internet portal Rioport.com. This portal provides a huge array of links to Internet music sites and other contents. Its so-called golden version will be launched by the end of June. Advertising and music sale will become major parts of the business. Diamond is planning to spin off Rioport.com as an IPO. My projection for the stock value of Rioport.com is at least $8 a share. Indeed, Rio alone is a huge source of revenue. So far Diamond has sold 250,000 Rio, priced between $150-200. With the increasing popularity of Internet music and Rio, the sale of Rio II is expected to be much stronger. 600,000 Rio for 1999 and 1 million for 2000 are conservative estimates. Moreover, Rio media player, a combination of Rio and home stereo and video will be launched by the end of this year. In the second venue, the Internet connectivity, Diamond has Homefree, a home networking product line, and makes DSL modems. It also plans to roll out cable modems and the Home Gateway- a device for connecting to the Internet. Home networking is forcasted to grow to an $1.3 billion market in just three years. Diamond's strategy in its traditional core business also seems to be on the right track. This strategy is to focus on fewer, more profitable high-end graphic cards. For example, its new graphic cards based on TNT2 look very promising. The disappointing Q1 earnings were in large part caused by the disconnection of Diamond from its old graphic chip supplier 3dfx. Meanwhile, Diamond has switched to Nvidia, the maker of TNT2. Based on numerous reviews, TNT2 is superior over 3dfx's Voodoo 3. The market demands of Diamond's new graphic cards are very strong. We believe that the switch to Nvidia was a correct strategic move. Indeed, the ability of Diamond in repositioning itself in order to remain on the very front of the cutting-edge technology is impressive. The first quarter earnings disappointment seems to be the last hurdle on the way up for Diamond. Now Diamond is firing all its cylinders on the three venues- Rio and Rioport.com, Internet connectivity, and multimedia. Its turning- around is very real, and the market will soon realize its true value. In particular, the expected spin-off of Rioport.com is a very important factor for investing in Diamond. It is even conceivable to organize the Internet connectivity part into another independent entity. My 12 month target for DIMD is $20 a share.