Post of the Day
July 27, 1998

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Subject: Oxy, Fools, and 3dfx
Author: howardroark

There is absolutely nothing wrong with questioning the value of this issue after a disappointing performance relative to consecutive earnings victories and an excellent cash position. But as anyone who has been involved in an adversarial process learns, 'devil's advocate'-type, extremist, head-to-head debate takes infinitely longer to reach an objectively efficient conclusion than impartial well rounded thought. Oxy, your thoughts are valuable, but the value is muted by the extremity of your contentions, which seem as motivated by emotion as they are by rational judgment. Here's why.

  "The idea that management has the magic button to lift the stock up by its bootstraps is fatuous."

The idea that management has the magic button to lift the stock up by its bootstraps is fatuous. Although an argument can be made that 3DFX could have contributed, through 'puffing', to lifting the stock, such an answer would never be a short or long term cure-all. In truth, none of us know the short term difference it would make, but I suspect it would be far less than you posit.

The "Castles in the Sky" that the market builds beyond "expected" earnings projections are based on many things, only a small bit of which are company press releases. Legitimate worries like competition, a limited market, early saturation, and lack of OEM interest in an economical PC age are much more likely to crush the sort of visions that underscore glowing P/E's. Repeated harping on the Wall Street marketing tendencies of management is only a piece, and at that a small piece, of the puzzle.

Instead of asking yourself, why is management screwing my portfolio? Ask yourself, what littany of things have soured the market on TDFX, and are these things likely to change? IMHO they will, and it won't be b/c management wises up and starts handing out Scientology brochures on Wall Street. It will be because TDFX establishes either 1) a brand name and demographic interest outside the disrespected "gamer" market through either OEM, website, or secondary apps. or 2) A long term and consistently growing earnings record within a sufficiently growing gamer market over 6 quarters of good earnings or more.

"When you put money on this stock, you had to know it was not the type of issue that investors would rally around."  

When you put money on this stock, you had to know it was not the type of issue that investors would rally around. Not unless something change. I don't care if management stands on the rooftops singing Evita. I am taking the low P/E's and betting on the transferability of the brand name and the technology into BOTH a growing gamer community and the overall PC market. We'll see.


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