Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>

3dfx Interviewed
Plus, near-miss top brand, AOL

by Jeff Fischer (TMFJeff)

PARIS, FRANCE (June 28, 1999) -- We are a peculiar race. Consider photography. Photography of humans can be priceless for historical reasons and invaluable for our descendants. Plus, during our lifetimes photos are fun, they burn memories into our definition of "forever," and they show our progression through time by appearance. All very practical. Foolish, even.

Now, consider the photography of landmarks. Not just any landmark, but the Eiffel Tower. Or Notre Dame Cathedral. Or the Washington Monument. In the course of a summer day, all of these landmarks are photographed several hundred or even thousand times by several hundred or thousand people. When other people (family or friends) are in each photograph taken with the landmark, this practice makes perfect sense. However, many of the pictures are taken of the landmark alone. No special someone edges in on the photo, not even a dog. Just the landmark -- a landmark by its lonesome.

Notre Dame has stood for 800 years and it will stand 1,000 more. This century, hundreds of millions of photos of it have been taken. You can buy thousands of absolutely perfect photos of Notre Dame. So, why is that almost every tourist must take their own -- usually inferior -- picture of the cathedral by itself? Also, why must we walk up and snap a photo of something that is 800-years-old and will be here 1,000 years more, long after our photo and ourselves are gone? When you think about it, shouldn't the landmark be snapping photos of us?

Picture Notre Dame Cathedral holding a giant camera between its two towers, continually snapping pictures of the scene far below. "I want to remember this. I want to remember these faces that I'll never see again," it would say to itself. Instead, it stands still, as it will for generations, and we will continue to take solitary pictures of it, even though we, not it, are the transitory things.

The main question remains, though: Why must we have our own generic (not branded with a human face that we know) photograph of famous landmarks when we can buy superior-quality reproduced pictures? The answer to that question holds a small key to human nature, and one key to business success.

Think about it. I won't propose an interpretation today.

Now, can this relate to stocks? Certainly. Many investors ponder a stock's fate on a daily basis when, in some cases, the stock has existed for a few lifetimes already and, in strong cases, it will exist for lifetimes more. We might sit and watch a stock move and ponder, "Will it be okay? What will become of it?" Meanwhile, the stock is looking back at us saying, "Don't worry about me, friend. I've been here a long time, and I'll be here for much, much longer. More than you, probably. Watch your health, not mine."

Which companies can say this? Johnson & Johnson, Coca-Cola, Pfizer, and perhaps America Online will all be here a century from today. The potential list is long and should include many Rule Makers.

Moving on, few of our companies reported news today, and none of it changed this portfolio's life decisions. To read particular news anytime, visit the Fool's main page and enter a ticker symbol in the top-left box. You receive not only press releases, but gobs of data and the recent message board posts, too. Also, visit the Fool's daily Breakfast, Lunchtime and Evening News for Foolish takes on events.

A 3dfx Interview
3dfx (Nasdaq: TDFX) announced today that its Voodoo3 products continue to lead the market as the two best-selling retail boards in North America. But that isn't all the company is doing.

Early this year, 3dfx announced a new 3dfx Gamers Website. We recently had the pleasure of interviewing Jason Wong, the Internet Marketing Specialist for 3dfx Interactive and the project manager for 3dfx Gamers. We asked Fools on the 3dfx board to provide questions, and Jason answered as many as possible. The following is Jason's interview.

Q. Hello, Jason. What is the purpose of 3dfx Gamers?

A. We designed 3dfx Gamers from the ground up to serve and expand the loyal following of 3dfx's core market. We also wanted to create a site that acts as "ground zero" for information on 3dfx products and the latest games optimized for them. This is important not only for our current core market of serious game enthusiasts, but also for the rapidly growing group of multimedia consumers who are purchasing Voodoo3 boards as part of systems from leading PC makers like Dell, Gateway, and Quantex.

Gamers want information and interaction. ALL Games Network (at http://www.allgames.com ), a division of Pseudo Programs, Inc., will supply 3dfx Gamers with 3D technology and software news updated throughout the day. The heart of the site, however, is in the interaction. Users will become part of the site, since they will in many cases be contributors themselves. This sense of belonging will be further fueled by features such as message boards and real-time chat sessions, which have proven immensely popular on current newsgroups.

Gamers will also love another aspect of the new site. Our strong relationships with the developer community mean we can deliver content that really will help make this site a hit. Developers want to publicize, beta test, and collect feedback on their new titles. With 3dfx Gamers, we've created a venue in which they can do that. And it allows gamers a sneak peek at a few titles they'll be hearing a lot about and will be dying to try out.

Q. What is your long-term vision for the site?

A. I want a site where the 3dfx gaming community starts their day. So, I want to provide them with basic services we can provide over this medium; up-to-date information, access to games, and a sounding board with other gamers. That's the basic foundation, and we will build from there.

We are also working on e-commerce component, as well as a few other expansion areas. To be honest, the 3dfx brand is strong enough to steer portions of the site into a lot of potentially very exciting directions.

Q. 3dfx built its reputation on high-end products targeted towards hard-core gamers. Greater success rests on penetrating the mass market while maintaining the very loyal following built over the past two to three years. How will the 3dfx marketing campaign and Website be constructed so as to appeal to both the hard core and main stream -- which is seen as a very difficult balance to achieve?

A. 3dfx will provide a sense of community both for hard-core gamers and for more mainstream consumers. We will do this in much the same way as any company with multiple product lines and multiple brands. A major automaker, for instance, presents different Web content, messages and experiences to SUV drivers than it does to full-size luxury car drivers. We are architecting our Web site infrastructure to ensure that different 3dx consumers know where to go for information that is exciting and relevant to them.

Q. Who is running the site? Is it 3dfx sponsored and run by an outside company, or will it actually be administered by 3dfx?

A. The Internet Marketing Group at 3dfx administers the site, though most of the content will be provided by customers and gamers, in addition to the news content from AGN. It is jointly sponsored by 3dfx Interactive and Dell Computer Corporation.

Q. What kind of product tie-ins will it feature? Will you sell 3dfx products or games?

A. In the near term, visitors can look for 3dfx branded promotional items for sale. As for additional product offerings, we're working that out. We will be careful to ensure that whatever we offer will dovetail with the relationships we have with our retail and PC-OEM partners.

Thank you, Jason.

The Fool thanks Jason Wong at 3dfx again for his time and work. Jason can be reached at jawong@3dfx.com. For discussion of the company, please visit the Fool's 3dfx message board.

A Near-Miss Top Brand
We close tonight with a thought on top brands, which David wrote about last week. It isn't surprising that America Online (NYSE: AOL) is now a top brand in North America -- everyone's mind is on the Internet and AOL accounts for over 50% of North America's Internet traffic. What is amusing is the real possibility that a majority of the people who named America Online as a top brand probably call the company "American Online."

Why is that?

When I hear people discuss America Online, half of them call it American Online, including people who have had the service for five years (hi, Mom!). It makes sense for American Airlines to be named "American," for example, but "American Online"? What would that be? A single American online somewhere? That's hardly the community image AOL strives for. America Online: that's the entire country, online. Lovely. American Online. Uh, that'd be Marty Solitary, of Des Moines, Alaska (not even Iowa), sitting in his 4x6 den, online all by himself.

"Anybody out there? Anybody? Am I the only American online?"

Other top brands: The Motley Crew financial site. Nope, they don't even get the "Crue" right!

Fool on!

06/28/99 Close
Stock  Change    Bid 
------------------ 
AMGN  +2 1/4     58.19
AMZN  +  1/2    110.69
AOL   +  11/16  103.69
ATHM  +1 1/4     52.75
CAT   +2 1/16    60.69
CHV   -  5/8     89.50
DD    +1 3/8     67.69
DJT   +  1/8      4.56
EBAY  +4 1/16   140.06
GT    +1 1/16    56.69
IOM   +  1/16     4.63
SBUX  -1 3/8     34.13
TDFX  -  3/8     15.06


             Day     Month  Year   History   Annualized 
      R-BREAKER  +1.03% -10.38%  19.94%  1103.82   66.24%
        S&P:     +1.22%   2.27%   8.89%  204.69%   25.56%
        NASDAQ:  +1.95%   5.34%  18.69%  261.36%   30.01%


    Rec'd    #  Security     In At       Now      Change
   8/5/94  2200 AmOnline       0.91    103.69   11308.65%
   9/9/97  1320 Amazon.com     6.58    110.69    1582.37%
  5/17/95  1960 Iomega Cor     1.28      4.63     261.21%
  12/4/98   900 Excite@Hom    28.04     52.75      88.12%
  4/30/97 -1170*Trump*         8.47      4.56      46.13%
  2/26/99   300 eBay         100.53    140.06      39.33%
 12/16/98   580 Amgen         42.88     58.19      35.71%
  2/23/99   300 Caterpilla    46.96     60.69      29.22%
   7/2/98   470 Starbucks     27.95     34.13      22.07%
  2/23/99   290 Goodyear T    48.72     56.69      16.37%
  2/20/98   260 DuPont        58.84     67.69      15.03%
  2/23/99   180 Chevron       79.17     89.50      13.05%
   1/8/98   425 3Dfx          25.67     15.06     -41.32%

    Rec'd    #  Security     In At     Value      Change
   8/5/94  2200 AmOnline    1999.47 228112.50  $226113.03
   9/9/97  1320 Amazon.com  8684.60 146107.50  $137422.90
  12/4/98   900 Excite@Hom 25236.13  47475.00   $22238.87
  2/26/99   300 eBay       30158.00  42018.75   $11860.75
 12/16/98   580 Amgen      24867.50  33748.75    $8881.25
  5/17/95  1960 Iomega Cor  2509.60   9065.00    $6555.40
  4/30/97 -1170*Trump*     -9908.50  -5338.13    $4570.38
  2/23/99   300 Caterpilla 14089.25  18206.25    $4117.00
   7/2/98   470 Starbucks  13138.63  16038.75    $2900.13
  2/23/99   290 Goodyear T 14127.38  16439.38    $2312.00
  2/20/98   260 DuPont     15299.43  17598.75    $2299.32
  2/23/99   180 Chevron    14250.50  16110.00    $1859.50
   1/8/98   425 3Dfx       10908.63   6401.56   -$4507.06

                              CASH   $9924.87
                             TOTAL $601908.93
 
Note: The Rule Breaker Portfolio was launched on August 5, 1994, with $50,000. Additional cash is never added, all transactions are shared and explained publicly before being made, and returns are compared daily to the S&P 500 (including dividends in the yearly, historic and annualized returns). For a history of all transactions, please click here.

</THE RULE BREAKER PORTFOLIO>

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