STB Systems

» see stb.com as it lived, on the wayback machine

~ the obit ~

Eighty percent of STB's sales went to manufacturers rather than to people, and seventy-two percent of all its sales were inside the United States. Both numbers are in its own annual report, and together they describe why the name means nothing here. An STB card reached you by arriving inside a finished Gateway or Dell, and the Turkish market of the late 1990s did not buy finished machines. You bought parts off a list and somebody assembled them on a counter. The hardware signature I kept on frmtr was a list of exactly those parts, and no line of it was ever a board bought sight unseen inside a complete PC.

The company was founded in 1981 in Richardson, Texas by Bill Ogle, who ran it as chairman and chief executive, alongside Don Balthaser and Mark Sims. They borrowed ten thousand dollars from a local bank and started making memory and graphics expansion cards for the Apple II. IBM PC products followed from 1983. The initials stood for Simply the Best, which is the kind of thing a founder names a company in 1981 and then has to keep saying out loud for eighteen years.

It grew into the quiet half of the 3D graphics boom. STB did not design chips. It bought them from nVidia, S3, 3Dfx, Cirrus Logic and 3Dlabs, then laid them out on boards for the people assembling computers. Net sales across the five fiscal years to 31 October 1998 ran $89.8 million, $129.6 million, $180.2 million, $199.5 million and then $266.3 million. Gateway was thirty-nine percent of that last figure and Dell thirty-one percent.

There is a number buried under the growth that explains the ending better than the growth does. Gross profit in the record year was $44.3 million, down from $50.0 million the year before. Sales rose by a third and the margin fell. STB was a contract manufacturer wearing a brand, and the brand was not doing much.

~ the rap sheet ~

~ the shed in juárez ~

STB began manufacturing in Ciudad Juárez in 1988 and by 1998 did substantially all of it there, in a leased building of 136,800 square feet on a lease that ran to November 2007. Capacity was about 500,000 boards a month. Of 2,156 employees at the end of 1998, 1,812 were in Mexico. The annual report gives the reason without decoration: low labor and shipping costs, plus proximity to Richardson.

That plant is the thing 3dfx actually bought, whatever the press releases said about synergy. 3dfx designed chips and let other people build the cards, and it wanted to build its own. A certified surface-mount line already running half a million units a month across the border from Texas was the fastest route there.

~ the warning that was already in the filing ~

STB signed the merger agreement on 13 December 1998 and filed its annual report on 28 January 1999, and the risk factors in that document read like a forecast written by someone who had given up arguing. Two of 3dfx's largest customers, Creative Labs and Diamond Multimedia, competed directly with STB, so sales to both were expected to fall significantly and they might stop being significant customers at all. And nVidia, whose chips sat on STB products representing 63.9 percent of fiscal 1998 net sales, competed directly with 3dfx.

Read that twice. The company's largest supplier was its buyer's rival, and the buyer's largest customers were its own rivals. Every commercial relationship STB had was about to be on the wrong side of the merger, and the merger went ahead anyway on a fixed exchange ratio of 0.65 of a 3dfx share per STB share, no adjustment for market price, roughly 8,267,000 shares issued and about 9,680,000 issued or reserved in total. Fractional entitlements were paid out in cash at $18.50 a share.

~ the plant goes up for sale ~

Voodoo Merger Sub, Inc. merged into STB Systems on 13 May 1999, with STB surviving as a wholly owned subsidiary and the name disappearing from the market. The announced price was around $141 million. Eighteen months after the closing, in November 2000, The Register reported that 3dfx intended to stop production in Juárez and sell the plant, since it was running under capacity, while insisting it was not leaving the card business. Nvidia bought the 3dfx assets on 15 December 2000.

stb.com does not answer at all now. The useful part of the story is not that 3dfx made a bad acquisition, which everyone wrote at the time. It is that the target said so first, in a public filing, in the ordinary flat prose of a risk-factor list, and the deal closed on schedule fifteen weeks later.

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