S3
Q2 Call
| S3
Q2 Call
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| (FOOL
CONFERENCE
CALL
SYNOPSIS)* By Adam Irving (MF Adam) S3 INCORPORATED ALEXANDRIA, Va., July 19, 1996/FOOLWIRE/ --- S3 Incorporated <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SIII)") else Response.Write("(NASDAQ:SIII)") end if %> today reported net income of $0.18 per share for the just-completed fiscal second quarter, missing First Call consensus estimates of $0.19 per share. These results were up $.01 over last year's second quarter results and down $.07 sequentially. The decrease was attributed to price erosion in the 2D market.
Sales in the second quarter were $103.8 million, up 47% over the same period last year, $70.6 million. Net revenue for the first six months was up 67% to $213.9 million against last year's $128 million. Gross margins as a percentage of sales for the second quarter were 38%, down 1.6% over the same period last year. Year to date gross margins are 38.8%, down 0.7% from last year's six month gross margin. Gross Margins are expected to be 39% for Q3 and 40% for Q4.
Net Income for the second quarter rose 10% to $8.8 million over $8.0 million last year. For the six months, net income was up 50% at 21.1 million versus $14.1 million last year. Per share net income for the first six months was $.42 this year versus $.32 last year. EXPANSION
Terry Holdt, S3's President and CEO, was encouraged by this second quarter announcing that S3 has shipped over a million Virge 3D products. He continued, "..the recent design wins with Compaq and Packard Bell, combined with our mobile offering and our upcoming audio and communication products, positions us well as we enter into the second half of 1996."
S3 sees itself bringing 3D graphics to mainstream PC users. The shipments of Virge 3D products have been shipped to a combination of add-in-card, OEM and systems manufacturers worldwide. Compaq recently announced that the ViRGE 3D multimedia accelerator is the graphics controller in certain models of their Presario line. Terry Holdt noted that the Virge 3D products accounted for 30% of Q2 revenue which was better than expected and that it could be 50% or more by Q4. Several game titles are expected to be on the shelves at Christmas using S3 graphics.
Speculating on Q3, they see S3 taking market share in Taiwan and Hong Kong. Japan and Korea are also establishing footholds with design house boutiques. System OEMs will be flat to slighlty up. Motherboard revenues are expected to decline in the US while increasing in the Far East. Add-in -card revenues should increase a little in the US and increase in the Far East. S3 acknowledged growing competition but noted that they are two and a half times the size of their next competitor and that they are in a significant lead with units and dollars.
George Halloran, CFO, noted that Q2 had increased spending on R&D and marketing partially contributing to a 2.4% increase in operating expenses as a percent of revenue. S3's Q2 DSO was at 79 compared to 66 in Q1, though it was noted that 80% of their Accounts Recievable were with their top 12 customers and they felt confident. They are also pleased to have sold down on older inventory and that currently 40% of inventory is finished goods with the balance work in progress.
S3 is the largest supplier of multimedia acceleration solutions for leading personal computer platforms and operating systems. S3 uses its' expertise in audio, video and graphics accleration hardware and software to create innovative and affordable products for the home, desktop and mobile markets. * A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. | |
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