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S3's Q4, fiscal 98 losses widen

But it's betting on Intel patent cross-licence for future glory

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Graphics specialist S3 saw its fourth quarter and full-year loss widen beyond expectations, when the troubled company released its latest figures yesterday. For the quarter, S3 lost $70.3 million on revenues of $41.5 million, well down on the $101.9 million in sales the company recorded in the same period last year. For the full fiscal year, the company loss totalled $113.2 million, including write-offs for impaired long-lived assets, underutilised wafer capacity and inventory obsolescence. Even without these, the company would have lost around $71.9 million, still more than Wall Street had anticipated. Revenue for the full year was $224.6 million, compared to $436.3 for fiscal 1997. S3's president and CEO, Ken Potashner, claimed the write-offs, although hitting the current results hard, would nevertheless significantly improve the company's cost structure for future quarters. Revenue for those future will be driven by the company's Savage 3D graphics acceleration chipset and alliances with PC vendors. IBM yesterday said it will use S3's Trio 3D accelerator in its new line of small business-oriented PCs; Fujistu has already agreed to bundle Savage 3D-based cards in its high-end multimedia machines. S3 is also betting on its ten-year patent licensing deal with Intel to give it a lead on its rivals, most notably ATI, the company that took over S3's role as the leading supplier of graphics technology to PC manufacturers. The deal gives S3 access to Intel's graphics infrastructure technologies and chipsets. "The Intel agreement gives S3 significant opportunities that our competitors don't have and we intend to leverage this strength to its fullest potential," said Potashner. "OEM and add-in-card customers worldwide have expressed substantial interest in doing business with S3 because of this partnership." Still, with ATI wowing the crowds -- and PC vendors, including Apple, in particular -- with its Rage 128 chip, S3 is going to have its work cut out for it. ® See also S3 retires Virge S3, Intel cuddle up ATI unveils Rage 128-based All-in-Wonder card

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