3Dfx deal means no Voodoo 3 for Creative or Diamond

Diamond Multimedia Systems Inc., for one, took a dim view of 3Dfx's shopping spree. "Those two are getting together out of necessity rather than by choice," said Ken Wirt, vice president of corporate communications for Diamond. "STB is in trouble. In the gaming segment, Nvidia and 3Dfx have been neck and neck, and we feel Nvidia is ahead now."

On Monday, 3Dfx dropped a bomb on the industry, unveiling plans to merge with STB and start selling boards based on its own Voodoo chips. Surprised by the move, the graphics chip company's customers -- such as Diamond and its rival, Creative Labs Inc. -- will soon find themselves competing with 3Dfx, their one-time ally. "You will see Diamond and Creative boards for Voodoo2 and Banshee, but not with Voodoo3," said Greg Ballard, 3Dfx's president and CEO. In fact, the only board maker that 3Dfx intends to continuing selling to will be Quantum3D Inc., which makes graphics boards for arcade games, said Ballard.

That suddenly snatches back a major brand name from Diamond's and Creative's product lines. While Wirt said the deal will have little short-term impact on Diamond, the future is less certain. While 3Dfx has had trouble winning contracts among PC makers in the past, the success of its Banshee 2-D/3-D chip may mean the company is now on the right track. But Wirt doesn't think so. 3Dfx's next chip -- the Voodoo3 -- won't live up to snuff, he said. "Voodoo3 is missing a number of key features for the OEM [PC maker] crowd: no 32-bit rendering, no 4x AGP compatibility, and too little memory," Wirt said.

Creative's graphics product manager, Jim Carlton, agreed. "Between those [drawbacks] I was struggling with how to integrate the Voodoo3 into our product roadmap," he said. "Now I don't have to worry about that."

A one-time proponent, Carlton continued his criticism, taking shots at Voodoo's Glide programming interface, used by software developers to give software an edge on Voodoo-equipped boards. "Glide was successful because it had great technology underneath," said Carlton. "Now it's dying out."

Wall Street analysts seemingly bobbed their heads in collective agreement. 3Dfx stock fell $3.44, or 21 percent, to close at $12.94, on the news of the merger.

Not surprisingly, rival graphics chip vendor Nvidia Corp. turned the announcement to its own advantage. "Our core competency is making graphics chips," said Lew Paceley, vice president of corporate marketing for the Californian company. "This is going to increase our distribution in retail -- it's going to be great for us." In other words, with 3Dfx out of the equation, Nvidia will have almost all of Diamond's and Creative's marketing muscle behind it.

But are the comments honest criticism or back-stabbing for business gain? "Look, business is business," said Diamond's Carlton. "They think this is the best business decision -- they have every right to make it."