Diamond Dog?

(This article originally appeared in the The Motley Fool's Lunchtime News on Thursday, April 03, 1997)

FOOL PLATE SPECIAL
An Investment Opinion by TMF Templr

Diamond Dog

DIAMOND MULTIMEDIA SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DIMD)") else Response.Write("(Nasdaq: DIMD)") end if %> was smashed for $1 3/8 to $7 1/8 after the firm pre-announced a first quarter loss. Diamond expects to lose $0.12 to $0.18 per share on lower-than-expected revenues impacted by price cuts, weak demand for graphics cards, lousy sales overseas, and the transition from 33.6 kbps to 56 kbps modems. Diamond's presence in the modem and graphics adapter card markets comes at a difficult time for both businesses.

Diamond's news comes right on the heels of last week's announcement by BOCA RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOCI)") else Response.Write("(Nasdaq: BOCI)") end if %> that it would not be able to ship 56 kbps modems this quarter due to a problem with simultaneous voice and data transmission (SVD). Both companies are using the ROCKWELL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ROK)") else Response.Write("(NYSE: ROK)") end if %> - LUCENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> standard, as opposed to the competing U.S. ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USRX)") else Response.Write("(Nasdaq: USRX)") end if %> standard that hit store shelves in mid-February. Diamond managed to get its 56 kbps product on store shelves on March 24th, a little more than a month after U.S. Robotics was selling new units and peddling software upgrades for its existing modem base. It looks like Diamond's reliance on K56FLEX technology instead of X2 technology cost it some critical time to market in the quarter.

On the graphics adapter side of the house, Diamond is apparently getting pounded by Singapore-based CREATIVE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CREAF)") else Response.Write("(Nasdaq: CREAF)") end if %>, up $1 1/2 to $10 5/8 this morning. Creative Chief Executive Sim Wong Hoo's cry of "AWEsome" in last quarter's press release has rung out again as the graphics and sound card company pre-announced blockbuster third quarter earnings. The success of Creative's 3D Blaster PCI combined with its intent to expand this into the Graphics Blaster product could explain some of Diamond's sales weakness. Diamond last made serious news more than a year ago in January of 1996 when the company mysteriously lost $2 million worth of inventory, dropping the stock down $9 13/16 to $16 7/16 in one nasty day. The continued disappointment is apparently driving shareholders away today.

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.

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