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3dfx clarifies graphics card strategy

Quitting production, yes - quitting retail, no

3dfx yesterday denied it is pulling out of the 3D graphics card business, although it is ending production at its Juarez, Mexico plant, which will indeed be sold off.

In a clarification of its earlier statements, made in filings with the US Securities and Exchange Commission, 3dfx said it will continue to address the retail graphics card market by outsourcing board production. The company will also seek out "additional retail partnerships".

Alex Leupp, 3dfx's president and CEO, said the move was being made to reduce the company's costs. "The sale of our Juarez facility will allow us to continue selling add-in-board products to the retail channel, with significantly reduced fixed costs," he said in a statement.

The plan should allow 3dfx to maintain its own brand of graphics cards and doesn't force the company to go cap in hand to the add-in board partners it annoyed back in 1998 when it decided to focus on the retail space by manufacturing its own cards. That move was cemented by the acquisition of board maker STB Systems.

Certainly, 3dfx's clarified strategy makes more sense than the complete about-face apparently signalled t'other day, allowing as it does 3dfx to continue to leverage the power of the Voodoo brand and to maintain its distribution channels. It will also allow it to respond more quickly to changing patterns of demand in the retail market.

Leupp also stressed the company's plan to target PC OEMs and emerging markets, such as the PC integrated chip-set business, Internet appliances and other devices.

The snag here is that both ATI and Nvidia are targeting these areas very aggressively. ATI has its system-on-a-chip operation, and Nvidia has the expertise gained through its partnership with Acer Labs. 3dfx has its powerful, bandwidth-minimising Gigapixel technology, but that's not due until its next-but-one generation of graphics chip, codenamed Mosiac. Rampage, the successor to the VSA-100 (and thanks to everyone who put us right on this one yesterday), comes first, and it will be interesting to see what it can offer potential customers in these emerging markets.

The longer 3dfx takes to come up with a compelling OEM solution - and VSA-100 doesn't appear to be it - the more time Nvidia has to cement its growing dominance of that sector. That said, if Nvidia can win market share from ATI, 3dfx can win market share from Nvidia - if it has sufficiently compelling products. ®

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