Rejecting its previous business model of building chip sets and selling them to manufacturers, in December 1998 3Dfx moved to become vertically integrated by acquiring card manufacturer STB Systems in a stock transaction worth $141 million. It was undeniably a gamble, especially when 3Dfx had angered a number of its old business partners by terminating its long-established contracts with third-party card manufacturers. It was also a dot-com-like move, one that expanded the company suddenly and violently and leveraged the whole business on its ability to expand its fortunes in the undefined future. Crucial to this, the company thought, was raising the 3Dfx brand instead of selling chips to companies like Diamond, which then made Diamond-branded cards. And 3Dfx needed to shore up the fortunes of Glide, which was under increasing pressure from Microsoft's Direct3D.

What this meant for the expanded company was that it suddenly had to take on the Herculean tasks of retail distribution, promotion, support, inventory and all the other needs of a hardware company that had to reach and deal with end users. And that was in addition to refocusing the remnants of STB as well as learning how to make the cards themselves at the new manufacturing plant in Juarez, Mexico. It was a bold move -- but it turned out to be the company's Waterloo.

Though he'd left the company by then, Hook says it was fear that drove 3Dfx to make this radical move: "They basically freaked out because they didn't trust their board vendors anymore, and they felt they could control the whole package going that route. They were also way deluded into thinking that they could leverage STB's relationships with OEMs like Dell into getting inclusion in Dell's systems. Bzzzt. OEMs don't care about the board vendor; they care about the chip set. Choice of board vendor becomes an issue when it comes down to pricing and availability." And 3Dfx was losing ground on all fronts. For example, even the Voodoo 3, still in prototype, would not support items, such as stencil buffering and destination alpha, that OEMs felt were necessary selling points.

Not that that was immediately apparent. At the turn of 1999, 3Dfx had a market capitalization of $200 million; almost one-third of all aftermarket 3-D cards sold carried 3Dfx chips; and various gaming Web sites were labeling the company "king of the 3-D hill." But some of the gaming press also asserted that Nvidia had stolen the show in hardware during 1998. And Nvidia had made deals that put its products into retail systems from Dell, Compaq, Micron and Gateway and was announcing quarter after quarter of record revenue, hitting $65.5 million a quarter in February 1999. A month before, Nvidia had gone public and was listed on the then booming NASDAQ.

When the five-months-late Voodoo 3 finally appeared in mid-1999 (at last, 3Dfx had an integrated 2-D/3-D card!), with actual product for the first time shipping under the 3Dfx name, the brand's reputation carried it to the top of PC Data's sales chart. But by then Nvidia had released, in six-month lockstep, the TNT2 chips and its ultimate market master, the GeForce.

While 3Dfx promoted the Voodoo 3's "T-buffer" technology -- which, Accelenation's Thomas Monk points out, offered little in place of raw fps power and relied on masses of once again expensive RAM -- Nvidia was announcing GeForce 256. It was the first 3-D accelerator that supported transformation and lighting (T&L) calculations right in the hardware, offloading those tasks from the CPU and making games look even better while preserving the all-important frame rate.

"They hit the market with a double-barreled shotgun," says Monk, "and stunned the competition." As for 3Dfx, developers were increasingly reluctant to churn out Glide versions of their games, which threatened to cut off the company at the knees, if not higher.

Nvidia made the most of this, taking the chance to rebrand the system not just as a 3-D accelerator but as a GPU -- a graphical processing unit. This capacity would require some rejiggering by game developers, but the change was made easier with Microsoft's support of it in revisions to Direct3D. Nvidia was a prized corporate partner now. How prized could be measured by the intrigue roiling around Microsoft's nascent Xbox.

Though practically everyone who was anyone in the field had at one time or another been rumored to be involved in Microsoft's attempt to unseat Sony and Nintendo in the console world, the leading candidate to manufacture the graphics processors had been a small start-up named Gigapixel. In fact, Gigapixel engineers worked in the same office buildings used by Microsoft's WebTV operation.

Behind the scenes in the spring of 2000, 3Dfx had been working to acquire Gigapixel, both for its promising intellectual property and the much needed windfall the Xbox deal would represent. However, that would be a $186 million swing and a miss.

Less than a month before the Gigapixel deal closed and long after it'd been set in irrevocable motion, Microsoft announced that it would instead co-develop with Nvidia a new GPU in the game machine. Early rumors that March had alone driven Nvidia stock up 71 percent, to $100 a share, in the three days before the official announcement; even after profit-taking, Nvidia's stock remained at all-time highs. In contrast, the bridesmaid 3Dfx had once again devoted resources and time to something that had only postponed the release of its long-awaited products.

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