<SUBMISSION>
<ACCESSION-NUMBER>0001010026-99-000016
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>19991031
<FILING-DATE>19991215
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>3DFX INTERACTIVE INC
<CIK>0001010026
<ASSIGNED-SIC>7372
<IRS-NUMBER>770390421
<STATE-OF-INCORPORATION>CA
<FISCAL-YEAR-END>0201
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-22651
<FILM-NUMBER>99775390
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>4435 FORTRAN DR
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
<PHONE>4089354400
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>4435 FORTRAN DR
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<DESCRIPTION>FORM 10-Q FOR PERIOD ENDED OCTOBER 31, 1999
<TEXT>

<HTML>
<head>
<TITLE>10Q doc</TITLE>
</head>

<body bgcolor=white>

<DIV align=left>
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</DIV>
<DIV align=left>
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</DIV>

<p align="center"><font size="3"><strong>UNITED STATES</br>
SECURITIES AND EXCHANGE COMMISSION</br>
Washington, D.C. 20549</strong></font></p>


<HR align=center SIZE=2 width="25%">
<br>
<p align="center"><font size="5"><strong>FORM 10-Q</strong></center></font></p>
<HR align=center SIZE=2 width="25%">

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>(Mark One)</i>


<p align="center"><font size="3"><strong>
   [X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934
</strong></font></p>
<p align="center"><font size="4" color="FF0000"><strong>
        for the period ended October 31, 1999
</strong></font></p>

<p align="center"><font size="3"><strong> OR </strong></font></p>

<p align="center"><font size="3"><strong>
[&nbsp;&nbsp;]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
</strong></font></p>
<p align="center"><font size="3"><strong>
 For the transition period from ________to _________
</strong></font></p>
<p align="center"><font size="3"><strong>
                       <u>Commission file number 0-22651</u>
</strong></font></p>
<p align="center"><font size="6" color="#0000FF"><strong>
                            <u>3DFX INTERACTIVE, INC.</u>
</strong></font></br>
<font size="2">
               (Exact name of Registrant as specified in its Charter)
</font></p>

<P>&nbsp;
<TABLE COLS=2 WIDTH="100%" >
<TR>
<TD>
<font size="3"><strong>
<CENTER><u>California</u></CENTER>
</font></strong>
</TD>
<TD>
<font size="3"><strong>
<CENTER><u> 77-0390421 </u></CENTER>
</font></strong>
</TD>
</TR>
<TR>
<TD>
<font size="2">
<CENTER>&nbsp; (State or Other Jurisdiction of Incorporation or Organization)&nbsp;</CENTER>
</font>
</TD>
<TD>
<font size="2">
<CENTER>(IRS Employer Identification Number)</CENTER>
</font>
</TD>
</TR>
</TABLE>
<BR>



<p align="center"><font size="3"><strong>
                               4435 Fortran Drive<br>
                           <u>San Jose, CA &nbsp;&nbsp;  95134
</strong></font></u><br>

<font size="2">
        (Address of Principal Executive Offices including Zip Code)
</font></p>

<p align="center"><font size="3"><strong><u>
                        Telephone Number (408) 935-4400
</strong></font></u><br>

<font size="2">
                 (Registrant's Telephone Number, Including Area Code)
<br>
<br>
<br>
(Former name, former address and former fiscal year if changed
 since last report)

</font></p>




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</DIV>

<p>&nbsp;&nbsp;&nbsp;
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for the past 90 days. &nbsp; YES [X] &nbsp;&nbsp; NO [&nbsp;&nbsp;] </p>



    As of November 30, 1999 there were 24,573,309 shares of the Registrant's
Common Stock outstanding.

<DIV align=left>
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</DIV>
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<HR align=left SIZE=2 width="100%">
</DIV>

<br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
</strong></p>
<p align="center"><strong>

                              3DFX INTERACTIVE, INC.<br>
                                    FORM 10-Q<br>
                                     INDEX
</strong></p>
<p align="center"><strong>
PART I. Financial Information
</strong></p>

<p>  Item 1. Financial statements

<BLOCKQUOTE>
<p><A HREF="#bs"> Condensed Consolidated Balance Sheets --
            October 31, 1999 and December 31, 1998</A>


<p><A HREF="#ops">
           Condensed Consolidated Statements of Operations -- Three Months
            and Nine Months ended October 31, 1999 and September 30, 1998</A>



<p><A HREF="#flows">
          Condensed Consolidated Statements of Cash Flows --
             Nine Months ended October 31, 1999 and September 30, 1998</A>




<p><A HREF="#notes">
         Notes to Condensed Consolidated Financial
         Statements</A>

</BLOCKQUOTE>


<p>Item 2.   Management's Discussion and Analysis of Financial Condition and Results of
          Operations

<BLOCKQUOTE>


<p><A HREF="#over">
           Overview</A>


<p><A HREF="#results">
         Results of Operations</A>


<p><A HREF="#liquid">
         Liquidity and Capital Resources</A>

<p><A HREF="#Y2K">
         Year 2000 Compliance</A>


<p><A HREF="#factors">
         Factors Affecting Operating Results</A>
</BLOCKQUOTE>








<p align="center"><strong>
PART II. Other Information
</strong></p>


<p>Item 6:  Exhibits and Reports on Form 8-K

<p align="left"><strong>
<A HREF="#sign">
Signatures</A>
</strong></p>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>

<p align="center"><strong>
PART I -- FINANCIAL INFORMATION
</strong></p>
<p>Item 1.  Financial Statements

<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>
<A NAME="bs"></A>
<p align="center"><strong>
                             3DFX INTERACTIVE, INC.<br>
                      CONDENSED CONSOLIDATED BALANCE SHEET<br>
                                 (In thousands)<br>
</strong>
<pre>

                                                        October 31,  December 31,
                                                           1999          1998
                                                      ------------  ------------
                                                       (unaudited)
Assets:
  Cash and cash equivalents ........................      $59,487       $92,922
  Short-term investments ...........................       14,610         3,058
  Accounts receivable, net .........................       77,534        36,335
  Inventory ........................................       41,286        23,991
  Other current assets .............................       15,819        12,089
                                                      ------------  ------------
          Total current assets .....................      208,736       168,395
  Property and equipment, net.......................       40,901        15,629
  Intangibles.......................................       14,818           --
  Goodwill..........................................       31,866           --
  Other assets......................................       10,720            97
                                                      ------------  ------------
                                                         $307,041      $184,121
                                                      ============  ============

Liabilities and Shareholders' Equity:
  Short-term debt ..................................      $27,000         $ --
  Accounts payable .................................       44,779        41,104
  Accrued liabilities ..............................       19,666        16,031
  Current portion of capitalized lease obligations .          655           389
                                                      ------------  ------------
          Total current liabilities ................       92,100        57,524
                                                      ------------  ------------
Other long term liabilities                                 2,001           284
                                                      ------------  ------------
Shareholders' equity:
  Common stock .....................................      249,497       126,569
  Warrants .........................................          242           242
  Deferred compensation ............................         (293)         (697)
  Unrealized loss on equity securities..............         (145)          --
  (Accumulated deficit) retained earnings ..........      (36,361)          199
                                                      ------------  ------------
          Total shareholders' equity ...............      212,940       126,313
                                                      ------------  ------------
                                                         $307,041      $184,121
                                                      ============  ============

</pre>
<p align="center"><strong>     See accompanying notes to
condensed consolidated financial statements.</strong></p>



<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>
<A NAME="ops"></A>
<p align="center"><strong>
                             3DFX INTERACTIVE, INC.<br>
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS<br>
                     (In thousands, except per share data)<br>
                                  (unaudited)
</strong>
<pre>
<font size="1">

                                      Three Months Ended         Nine Months Ended
                                   -------------------------  -------------------------
                                   October 31,  September 30, October 31,  September 30,
                                      1999         1998          1999         1998
                                   ------------ ------------  ------------ ------------
Revenues.........................     $105,856      $33,206      $251,135     $141,858
Cost of revenues.................       88,624       24,971       191,122       81,144
                                   ------------ ------------  ------------ ------------
  Gross profit...................       17,232        8,235        60,013       60,714
                                   ------------ ------------  ------------ ------------
Operating expenses:
  Research and development.......       18,040       10,038        46,373       24,172
  Selling, general and                  18,329        6,971        43,954       24,650
  Restructuring expense..........        1,830        --            1,830        --
  In-process research and
   development...................          --         --            4,302        --
  Amortization of goodwill
   and intangibles...............        3,627        --            6,601        --
                                   ------------ ------------  ------------ ------------
  Total operating expenses.......       41,826       17,009       103,060       48,822
                                   ------------ ------------  ------------ ------------
Income (loss) from operations....      (24,594)      (8,774)      (43,047)      11,892
Interest and other income, net...          393       13,045         1,988       14,610
                                   ------------ ------------  ------------ ------------
Income (loss) before income
  taxes..........................      (24,201)       4,271       (41,059)      26,502
(Benefit) provision for income
  taxes..........................       (6,583)       1,153        (9,658)       6,889
                                   ------------ ------------  ------------ ------------
Net income (loss)................     ($17,618)      $3,118      ($31,401)     $19,613
                                   ============ ============  ============ ============
Net income (loss) per share:
  Basic..........................       ($0.73)       $0.20        ($1.48)       $1.34
                                   ============ ============  ============ ============
  Diluted........................       ($0.73)       $0.20        ($1.48)       $1.22
                                   ============ ============  ============ ============
Shares used in net income (loss)
 per share calculations:
  Basic..........................       24,131       15,437        21,163       14,674
                                   ------------ ------------  ------------ ------------
  Diluted........................       24,131       15,819        21,163       16,024
                                   ------------ ------------  ------------ ------------

</font size="1">
</pre>
<p align="center"><strong>     See accompanying notes to
condensed consolidated financial statements.</strong></p>





<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>
<A NAME="flows"></A>
<p align="center"><strong>
                             3DFX INTERACTIVE, INC.<br>
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<br>
                                 (In thousands)<br>
                                  (unaudited)
</strong>
<pre>

                                                         Nine Months Ended
                                                      -----------------------
                                                      October 31, September 30,
                                                          1999        1998
                                                      ----------- -----------
Cash flows from operating activities:
  Net (loss) income .................................   ($31,401)    $19,613
  Adjustments to reconcile net loss to net
     cash provided by (used in) operating
     activities:
     Amortization ...................................      6,601        --
     Depreciation ...................................      9,537       3,538
     Write-off of acquired in-process research             4,302        --
     Stock compensation..............................        363         363
     Increase in allowance for doubtful
       accounts......................................      2,653       1,561
     Changes in assets and liabilities:
       Accounts receivable...........................     (7,586)    (14,735)
       Inventory.....................................      9,118     (21,626)
       Other assets..................................      1,279        (657)
       Accounts payable..............................    (14,335)     22,171
       Accrued liabilities...........................     (9,059)      5,506
                                                      ----------- -----------
     Net cash (used in) provided by operating
         activities..................................    (28,528)     15,734
                                                      ----------- -----------
Cash flows from investing activities:
  Maturities (purchases)of short-term investments,
    net..............................................      6,665      (7,639)
  Acquisition of STB Systems, Inc....................     (9,084)       --
  Purchases of property and equipment................    (20,972)    (10,289)
                                                      ----------- -----------
     Net cash used in investing activities...........    (23,391)    (17,928)
                                                      ----------- -----------
Cash flows from financing activities:
  Proceeds from secondary public offering, net.......       --        54,752
  Proceeds from issuance (repurchase) of
     Common Stock, net...............................     (3,082)      1,217
  Principal payments of capitalized lease
     obligations, net................................       (315)       (787)
  Proceeds (payments) on drawdown on line of
     credit, net.....................................     11,209        (777)
                                                      ----------- -----------
     Net cash (used in) provided by financing
         activities..................................      7,812      54,405
                                                      ----------- -----------
Net increase (decrease) in cash and
  cash equivalents...................................    (44,107)     52,211
Cash and cash equivalents at beginning
  of period..........................................    103,594      28,937
                                                      ----------- -----------
Cash and cash equivalents at end of period...........    $59,487     $81,148
                                                      =========== ===========

</pre>
<p align="center"><strong>     See accompanying notes to
condensed consolidated financial statements.</strong></p>

<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>



<A NAME="notes"></A>
<p align="center"><strong>
                               3DFX INTERACTIVE, INC.
</strong><br>
<strong>
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</strong>


<p><strong>Note 1 - The Company and Its Significant Accounting Policies:</strong></p>


<p>3Dfx Interactive Inc. (the "Company" or "3Dfx") was incorporated in
California on August 24, 1994. The Company is engaged in the design,
development, marketing and support of 3D and 2D media processors,
subsystems and API software for the interactive electronic entertainment
market.

<p>The unaudited condensed consolidated financial statements included
herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission.  Certain
information or footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.  In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all adjustments,
consisting only of normal recurring adjustments, necessary to present
fairly the financial information included therein.  While the Company
believes that the disclosures are adequate to make the information not
misleading, it is suggested that these financial statements be read in
conjunction with the audited financial statements and accompanying notes
included in the Company's Annual Report on Form 10-K, as amended, for
the fiscal year ended December 31, 1998 as filed with the Securities and
Exchange Commission. On March 29, 1999, the Board of Directors
determined that it would be in the best interests of the Company and its
shareholders to change its fiscal year from a fiscal year ending December
31 to a year beginning on February 1 and ending on January 31
beginning on February 1, 1999. The results of operations for the
quarter or nine months ended October 31, 1999 are not necessarily
indicative of the results to be expected for the full year.

<p>Three customers represented 13%, 12% and 11% and one customer
represented 15% of the Company's revenues during the third quarter and
first nine months of fiscal 2000, respectively.  Three customers
represented 25%, 20% and 10% and three customers represented 35%, 20%
and 15% of the Company's revenue during the third quarter and first nine
months of 1998, respectively.

<p><strong>Note 2 - Inventory:</strong></p>

<pre>

                                              October 31,  December 31,
                                                 1999          1998
                                            ------------  ------------
Raw materials.............................      $25,155        $6,207

Work in-process...........................        9,106        13,249

Finished goods............................        7,025         4,535
                                            ------------  ------------
     Total inventory......................      $41,286       $23,991
                                            ============  ============

</pre>



<p><strong>Note 3 - Merger Agreement:</strong></p>

<p>In December 1998, the Company entered into an Agreement and Plan of
Reorganization (the "Merger Agreement") with STB Systems Inc., a Texas
corporation ("STB"). The Merger Agreement provided for the merger of a
newly formed, wholly owned subsidiary of 3Dfx with and into STB.  STB is
the surviving corporation of the Merger and became a wholly owned
subsidiary of 3Dfx. The merger was accounted for under the purchase
method of accounting.  The merger was consummated on May 13, 1999.

<p>The purchase price of $133.2 million includes $116.1 million of
stock  issued at fair value (fair value being determined as the
average price of the 3Dfx stock for a period three days before and
after the announcement of the merger), $9.9 million in STB stock option
costs (being determined under both the Black Sholes formula and in
accordance with the Merger Agreement) and $7.2 million in estimated
expenses of the transaction.  The purchase price was allocated
as follows:  $85.6 million to the estimated fair value of STB net
tangible assets purchased (as of May 13, 1999), $(7.6) million to
establish deferred tax liabilities associated with the certain
intangibles acquired, $4.3 million to purchased in-process research
and development, $11.4 million to purchased existing technology, $4.4
million to trademarks, $2.3 million to workforce-in-place, $1.0 million
to executive covenants and $31.8 million to goodwill.  The allocation of
the purchase price to intangibles was based upon an independent, third
party appraisal and management's estimates.

<p>The intangible assets and goodwill acquired have estimated useful lives
and estimated first year amortization, as follows:

<pre>

                                                               Calculated
                                                  Estimated    First Year
                                      Amount     Useful Life  Amortization
                                    ----------- ------------- ------------
Purchased existing technology:
      1.5 year life................ $6,475,000      1.5 years  $4,317,000
      3 year life..................  4,966,000        3 years   1,655,000
Trademarks.........................  4,406,000        5 years     881,000
Workforce-in-place.................  2,250,000        5 years     450,000
Executive covenants................  1,000,000        5 years     200,000
Goodwill........................... 31,880,000        5 years   6,376,000

</pre>

<p>The value assigned to purchased in-process research and
development ("IPR&D") was determined by identifying research projects
in areas for which technological feasibility had not been established.
These include projects for Voodoo3 as well as other specialized
technologies totaling $4.3 million.  The value was determined by
estimating the expected cash flows from the projects once commercially
viable, discounting the net cash flows back to their present value and
then applying a percentage of completion to the calculated value as
defined below.

<p>Net Cash Flows.  The net cash flows from the identified projects
are based on our estimates of revenues, cost of sales, research and
development costs, selling, general and administrative costs, royalty
costs and income taxes from those projects.  These estimates are based
on the assumptions mentioned below.  The research and development costs
included in the model reflect costs to sustain projects, but exclude
costs to bring in-process projects to technological feasibility.

<p>The estimated revenues are based on management projections of
each in-process project and the business projections were compared and
found to be in line with industry analysts' forecasts of growth in
substantially all of the relevant markets.  Estimated total revenues
from the IPR&D product areas are expected to peak in the year ending
December 31, 1999 and decline from 2000 into 2001 as other new products
are expected to become available.  These projections are based on our
estimates of market size and growth, expected trends in technology and
the nature and expected timing of new project introductions by our
competitors and us.

<p>Projected gross margins approximate STB's recent historical performance
and are in line with comparable industry margins.  The estimated
selling, general and administrative costs are consistent with STB's
historical cost structure, which is in line with industry averages at
approximately 10% of revenues.  Research and development costs are
consistent with STB's historical cost structure.

<p>Royalty rate.  The Company applied a royalty charge of 25% of
operating income for each in-process project to attribute value for
dependency on predecessor core technologies.

<p>Discount rate.  Discounting the net cash flows back to their
present value is based on the industry weighted average cost of capital
("WACC").  The industry WACC is approximately 14%.  The discount rate
used in discounting the net cash flows from IPR&D is 20%, a 600 basis
point increase from the industry WACC.  This discount rate is higher
than the industry WACC due to inherent uncertainties surrounding the
successful development of the IPR&D, market acceptance of the
technology, the useful life of such technology and the uncertainty of
technological advances which could potentially impact the estimates
described above.

<p>Percentage of completion.  The percentage of completion for each
project was determined using costs incurred to date on each project as
compared to the remaining research and development to be completed to
bring each project technological feasibility.  The percentage of
completion varied by individual project ranging from 50% to 91%.
If the projects discussed above are not successfully developed,
the sales and profitability of the combined company may be adversely
affected in future periods.

<p>Pro forma results of operations for the combined company as if the
transaction had consummated at the beginning of the earliest period
presented and carried forward into 1999 are as follows:

<pre>


                                              Nine Months       Year
                                                 Ended         Ended
                                              October 31,   December 31,
                                                  1999          1998
                                              ------------  ------------
  Revenues .................................     $331,924      $467,441
                                              ------------  ------------

  Net income (loss) ........................     ($49,175)       $9,110
                                              ------------  ------------

  Basic net income (loss) per share ........       ($2.32)        $0.40
                                              ============  ============

  Diluted net income (loss) per share ......       ($2.32)        $0.37
                                              ============  ============

</pre>

<p>On a combined basis, there were no material transactions between the
Company and STB during the periods presented except for sales of
product by the Company to STB which have been eliminated.

<p><strong>Note 4 - Restructuring expense:</strong></p>

<p>In August 1999, the Company recorded a restructuring charge of
$1,830,000 representing a one-time reduction in workforce related to the
merger with STB.

<p><strong>Note 5 - Public Offering:</strong></p>

<p>In March 1998, the Company completed a public offering of 2,900,000
shares of common stock at a price of $23.75 per share.  Of the 2,900,000
shares offered, 2,028,140 were sold by the Company and 871,860 were sold
by selling shareholders. The Company received cash of approximately
$45.5 million, net of underwriting discounts and commissions and other
offering costs. The Company did not receive any of the proceeds from the
sale of shares by the selling shareholders.  On March 23, 1998, the
Company's underwriters exercised an option to purchase an additional
435,000 shares of common stock at a price of $23.75 per share to cover
over-allotments.  In connection with the exercise of such option, the
Company received cash of approximately $9.3 million, net of underwriting
discounts and commissions and other offering costs.

<p><strong>Note 5 - Net Income (Loss) per Share: </strong></p>

<p>Basic net income (loss) per share is computed using the weighted
average number of common shares outstanding during the periods. Diluted
net income (loss) per share is computed using the weighted average
number of common and potentially dilutive common shares during the
periods. A reconciliation of the numerators and denominators of the
basic and diluted per share computations as follows (in thousands,
except per share data):


<pre>
<font size="1">

                                      Three Months Ended         Nine Months Ended
                                   -------------------------  -------------------------
                                   October 31,  September 30, October 31,  September 30,
                                      1999         1998          1999         1998
                                   ------------ ------------  ------------ ------------
Net income (loss) available to
  common shareholders
  (numerator)....................     ($17,618)      $3,118      ($31,401)     $19,613
Weighted average common shares
  outstanding (denominator for
  basic computation).............       24,131       15,437        21,163       14,674
Effect of dilutive securities --
  common stock equivalents.......        --             382         --           1,350
                                   ------------ ------------  ------------ ------------
Weighted average shares
  outstanding (denominator for
  diluted computation)...........       24,131       15,819        21,163       16,024
                                   ============ ============  ============ ============
Basic net income (loss)
 per share.......................       ($0.73)       $0.20        ($1.48)       $1.34
                                   ============ ============  ============ ============
Diluted net income (loss)
 per share.......................       ($0.73)       $0.20        ($1.48)       $1.22
                                   ============ ============  ============ ============

</font size="1">
</pre>


<p>During the three and nine months ended October 31, 1999, weighted
average options under the treasury stock method to purchase
approximately 4,156,000 and 3,368,000 shares, respectively, were
outstanding but not included in the computation because they were
antidilutive.

<p><strong>Note 6 - Income Taxes:</strong></p>

<p>The Company recorded an income tax benefit of $6.6 million for the three
months ended October 31, 1999, at an effective tax rate equal to 27% of
pretax income. The Company recorded a provision for income taxes of $1.2
million for the three months ended September 30, 1998, an effective tax
rate of 27%. The Company recorded an income tax benefit of $9.7 million
for the nine months ended October 31, 1999, an effective tax rate of
24%. The Company recorded a provision for income taxes of $6.9 million
for the nine months ended September 30, 1998, an effective tax rate of
26%. The Company's effective tax rate in fiscal 2000 differed from the
statutory rate due to the impact of non-deductible expenses including
intangible amortization and in-process research and development.  The
effective tax rate in fiscal 1998 is different from the statutory rate
due to the utilization of federal and state net operating loss
carryforwards and tax credits.

<p><strong>Note 7 - Comprehensive Income:</strong></p>

<p>In January 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130) which establishes standards for reporting and displaying
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements. Such
items may include foreign currency translation adjustments, unrealized
gains/losses from investing and hedging activities, and other
transactions. Comprehensive income for the three months and the nine
months ended October 31, 1999 differed by $145,000, respectively, for
each period.  Comprehensive income for the three months and the nine
months ended September 30, 1998 was not materially different from net
income.

<p><strong>Note 8 - Short-term Debt:</strong></p>

<p>As a result of the merger with STB, the Company has a $40 million
revolving credit facility ("Revolving Credit Facility") with a bank.
The Revolving Credit Facility bears interest at LIBOR plus 175 basis
points (7.1588% at October 31, 1999).  At October 31, 1999, the Company
had $27.0 million outstanding under the Revolving Credit Facility.
Availability under the Revolving Credit Facility is subject to
limitation determined by the Company's borrowing base, which is
calculated based on eligible accounts receivable, as defined in the
Revolving Credit Facility Agreement. Subsequent to October 31, 1999, the
Company renegotiated the existing Revolving Credit Facility to a $25
million level which bears interest at LIBOR plus 100 basis points.
Coincident with the extension, the Company pledged $25 million in
marketable securities to secure the new Revolving Credit Facility.


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<p align="center"><strong>
                               3DFX INTERACTIVE, INC.
</strong>

<p><strong>Item 2.   Management's Discussion and Analysis of Financial
Condition  and Results of Operations</strong></p>

<p>The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements
include  the sentence in the second paragraph under "Overview"
regarding expected customer concentration; the sentence in the fourth
paragraph under "Overview" regarding availability of raw materials;
 the sentences in the third and tenth paragraph under "Results of
Operations" regarding factors affecting gross profit; the sentences in
the fourth and fifth and eleventh and twelfth paragraphs under
"Results of Operations" regarding future research and development
and selling, general and administrative costs, respectively; the
sentence in the second paragraph under "Liquidity and Capital Resources"
regarding capital expenditures;  the statements in the fourth paragraph
under "Liquidity and Capital Resources" regarding future liquidity and
capital requirements and the statements below under "Factors Affecting
Future Operating Results". These forward-looking statements are based
on current expectations and entail various risks and uncertainties that
could cause actual results to differ materially from those projected
in the forward-looking statements. Such risks and uncertainties are
set forth below under "Factors Affecting Future Operating Results".

<A NAME="over"></A>
<p><strong>Overview</strong></p>

<p>The Company was founded in August 1994 to design, develop, market and
support 3D media processors, subsystems and API software for the
interactive electronic entertainment market.  The Company derives
revenue from the sale of 3D and 3D/2D media processors and graphics
boards designed for use in PCs and coin-op arcade systems. The Company
began commercial shipments of its first 3D graphics product, the Voodoo
Graphics chipset, in September 1996 and introduced subsequent media
processors in 1997 and 1998.  In March 1999, the Company began shipment
of its Voodoo3 product family of enhanced and more fully-featured,
single chip 3D/2D media processors.  The Voodoo3 product family broadens
the Company's products to include board-level products.

<p>The Company's sales have historically been concentrated among a
limited number of customers. Revenues derived from sales to Dell
Computer Corporation, Ingram Micro and Gateway, Inc. accounted
for approximately 13%, 12% and 11% of revenues for the quarter
ended October 31, 1999. Revenues derived from sales to Ingram Micro
accounted for 15% of revenues for the nine monthes ended October 31, 1999.
STB prior to the May 13, 1999 effective date of the merger accounted for
8% of revenues for the nine months ended October 31, 1999. Revenues
derived from sales to Creative Technology, Ltd. ("Creative"), Elitetron
Electronic Co., Ltd. ("Elitetron"), and Guillemot International
("Guillemot") accounted for approximately 25%, 20% and 10%,
respectively, of revenues for the quarter ended September 30, 1998.
Revenues derived from Diamond Multimedia Systems, Inc. ("Diamond"),
Creative and Elitetron accounted for approximately 35%, 20% and 15%,
respectively, of revenues for the first nine months of fiscal 1998. The
Company expects that a small number of customers will continue to
account for a substantial portion of its total revenues for the
foreseeable future.  The loss of any one of these customers could have a
material impact on the Company's results of operations, cash flows, or
financial position.  In addition, sales to these customers can fluctuate
and could have a material impact on the Company's revenues and
profitability on a quarterly basis.

<p>The announcement and consummation of the merger between 3Dfx and STB has
caused some of 3Dfx's customers to end or curtail their relationships
with the combined company. For example, two of 3Dfx's largest customers,
Creative Labs and Diamond, compete directly with STB. In dollars, these
customers together accounted for approximately $117.5 million of 3Dfx's
total revenue in 1998. Sales to Diamond and Creative Labs following the
merger have been reduced significantly from prior levels and these
customers are no longer customers of the combined company.
To date, the loss of business from former 3Dfx customers has not been
fully replaced through the sale of the combined company's own add-in-
board level products. If other major customers of 3Dfx terminate their
relationship with the combined company or sales of the combined company's
add-in boards continue to be less than sales to former 3Dfx customers,
the Company's business could be materially harmed.

<p>As part of its manufacturing strategy, the Company leverages the
expertise of third party suppliers in the areas of wafer fabrication,
assembly, quality control and assurance, reliability and testing. This
strategy allows the Company to devote its resources to research and
development and sales and marketing activities while avoiding the
significant costs and risks associated with owning and operating a wafer
fabrication facility and related operations. The Company does not
manufacture the semiconductor wafers used for its products and does not
own or operate a wafer fabrication facility. All of the Company's wafers
are currently manufactured by Taiwan Semiconductor Manufacturing
Corporation ("TSMC") in Taiwan. The Company obtains manufacturing
services from TSMC on a purchase order basis. The Company provides TSMC
with a rolling six month forecast of its supply needs and TSMC builds to
the Company's orders. The Company purchases wafers and die from TSMC.
Once production yield for a particular product stabilizes, the Company
pays an agreed price for wafers meeting certain acceptance criteria
pursuant to a "good die" only pricing structure for that particular
product. Until production yield for a particular product stabilizes,
however, the Company must pay an agreed price for wafers regardless of
yield. Such wafer and die purchases constitute a substantial portion of
cost of products revenues once products are sold. TSMC is responsible
for procurement of raw materials used in the production of the Company's
products. The Company believes that raw materials required are readily
available.  The Company's products are packaged by two third party
subcontractors,  Advanced Semiconductor Engineering Group ("ASE") and
Caesar Technology, Inc.  All of the Company's products are tested by
ASE.  Such assembly and testing is conducted on a purchase order basis
rather than under a long-term agreement.  All purchases of wafers and
assembly and test services are denominated in U.S. dollars.
The Company depends on these suppliers to allocate a portion of their
manufacturing capacity sufficient to meet the Company's needs, to produce
products of acceptable quality and at acceptable manufacturing yields, and
to deliver those products to us on a timely basis. These manufacturers may
not always be able to meet the Company's near-term or long-term manufacturing
requirements.

<p>In connection with the grant of stock options to employees since
inception (August 1994) through the effective date of the Company's IPO,
the Company recorded aggregate deferred compensation of approximately
$1.9 million, representing the difference between the deemed fair value
of the Common Stock for accounting purposes and the option exercise
price at the date of grant. This amount is presented as a reduction of
shareholders' equity and is amortized ratably over the vesting period of
the applicable options. This amortization resulted in charges to
operations of $484,000 (of which $194,000 and $290,000 were recorded in
research and development expenses and selling, general and
administrative expenses, respectively) in each of the years ended
December 31, 1998 and 1997, and  $196,000 (of which $50,000 and $146,000
were recorded in research and development expenses and selling, general
and administrative expenses, respectively in the year ended December 31,
1996, and will result in quarterly through the second quarter of fiscal 2001
aggregating approximately $121,000 per quarter (of which $48,000 and $73,000
will be recorded in research and development expenses and selling, general and
and administrative expenses, respectively).

<p>In December 1998, the Company entered into an Agreement and Plan of
Reorganization (the"Merger Agreement") with STB Systems Inc., a Texas
corporation ("STB"). The Merger Agreement provided for the merger of a
newly formed, wholly owned subsidiary of 3Dfx with and into STB.  STB is
the surviving corporation of the Merger and became a wholly owned
subsidiary of 3Dfx. The merger is accounted for under the purchase
method of accounting. The merger was consummated on May 13, 1999.

<p>The purchase price of $133.2 million includes $116.1 million of
stock  issued at fair value (fair value being determined as the
average price of the 3Dfx stock for a period three days before and
after the announcement of the merger), $9.9 million in STB stock option
costs (being determined under both the Black Sholes formula and in
accordance with the Merger Agreement) and $7.2 million in estimated
expenses of the transaction.  The purchase price was allocated
as follows:  $85.6 million to the estimated fair value of STB net
tangible assets purchased (as of May 13, 1999), $(7.6) million to
establish deferred tax liabilities associated with the certain
intangibles acquired, $4.3 million to purchased in-process research
and development, $11.4 million to purchased existing technology, $4.4
million to trademarks, $2.3 million to workforce-in-place, $1.0 million
to executive covenants and $31.8 million to goodwill.  The allocation of
the purchase price to intangibles was based upon an independent, third
party appraisal and management's estimates.

<p>The intangible assets and goodwill acquired have estimated useful lives
and estimated first year amortization, as follows:

<pre>

                                                               Calculated
                                                  Estimated    First Year
                                      Amount     Useful Life  Amortization
                                    ----------- ------------- ------------
Purchased existing technology:
      1.5 year life................ $6,475,000      1.5 years  $4,317,000
      3 year life..................  4,966,000        3 years   1,655,000
Trademarks.........................  4,406,000        5 years     881,000
Workforce-in-place.................  2,250,000        5 years     450,000
Executive covenants................  1,000,000        5 years     200,000
Goodwill........................... 31,880,000        5 years   6,376,000

</pre>


<p>The value assigned to purchased in-process research and
development ("IPR&D") was determined by identifying research projects
in areas for which technological feasibility had not been established.
These include projects for Voodoo3 as well as other specialized
technologies totaling $4.3 million.  The value was determined by
estimating the expected cash flows from the projects once commercially
viable, discounting the net cash flows back to their present value and
then applying a percentage of completion to the calculated value as
defined below.

<p>Net Cash Flows.  The net cash flows from the identified projects
are based on our estimates of revenues, cost of sales, research and
development costs, selling, general and administrative costs, royalty
costs and income taxes from those projects.  These estimates are based
on the assumptions mentioned below.  The research and development costs
included in the model reflect costs to sustain projects, but exclude
costs to bring in-process projects to technological feasibility.
The estimated revenues are based on management projections of
each in-process project and the business projections were compared and
found to be in line with industry analysts' forecasts of growth in
substantially all of the relevant markets.  Estimated total revenues
from the IPR&D product areas are expected to peak in the year ending
December 31, 1999 and decline from 2000 into 2001 as other new products
are expected to become available.  These projections are based on our
estimates of market size and growth, expected trends in technology and
the nature and expected timing of new project introductions by our
competitors and us.

<p>Projected gross margins approximate STB's recent historical
performance and are in line with comparable industry margins.  The
estimated selling, general and administrative costs are consistent with
STB's historical cost structure, which is in line with industry
averages at approximately 10% of revenues.  Research and development
costs are consistent with STB's historical cost structure.

<p>Royalty rate.  The Company applied a royalty charge of 25% of
operating income for each in-process project to attribute value for
dependency on predecessor core technologies.

<p>Discount rate.  Discounting the net cash flows back to their
present value is based on the industry weighted average cost of capital
("WACC").  The industry WACC is approximately 14%.  The discount rate
used in discounting the net cash flows from IPR&D is 20%, a 600 basis
point increase from the industry WACC.  This discount rate is higher
than the industry WACC due to inherent uncertainties surrounding the
successful development of the IPR&D, market acceptance of the
technology, the useful life of such technology and the uncertainty of
technological advances which could potentially impact the estimates
described above.

<p>Percentage of completion.  The percentage of completion for each
project was determined using costs incurred to date on each project as
compared to the remaining research and development to be completed to
bring each project technological feasibility.  The percentage of
completion varied by individual project ranging from 50% to 91%.
If the projects discussed above are not successfully developed,
the sales and profitability of the combined company may be adversely
affected in future periods.


<A NAME="results"></A>
<p><strong>Results of Operations</strong></p>

<p>The results of operations for the three and nine month periods presented
include the effect of the merger with STB from the date of consummation,
May 13, 1999 which is discussed in Note 2 to the Unaudited Consolidated
Condensed Financial Statements contained herein and above in "Overview".

<p><strong>Three Months Ended October 31, 1999 and September 30, 1998</strong></p>

<p>Revenues.  Revenues are recognized upon product shipment. The
Company's total revenues were $105.8 million in the three months ended
October 31, 1999, and $33.2 million in the three months ended September
30, 1998.  The increase was primarily attributable to revenues
generated from board-level sales incorporating Voodoo3 technology.
Substantially all of the revenues in the three months ended
September 30, 1998 were derived from sale of the Company's Voodoo
Banshee chip and Voodoo2 chipsets. As a result of the merger, some of
the Company's former significant customers do not do business with the
combined company because these customers were competitors of STB and
are therefore competitors of the combined company.  See "Overview".

<p>Gross Profit.  Gross profit consists of total revenues less cost of
revenues. Cost of revenues consists primarily of costs associated with
the purchase of board-level components, such as memory chips and the
procurement of semiconductors from the Company's contract manufacturers,
 labor and overhead associated with such procurement, board-level
assembly cost, warehousing, shipping and warranty costs.  Gross
profit as a percentage of revenues was 16% and 25% in the three months
ended October 31, 1999 and September 30, 1998, respectively. The
decrease can primarily be attributed to the gross profit generated from
sales of board-level products which have lower margins as compared with
the margins on chip-only products. The decrease can also be attributed
to higher than expected memory prices, expedite charges for products
resulting from the recent Taiwan earthquake, and a greater percentage
of revenues generated from PC systems manufacturers, which carry
a lower gross margin than revenues generated from the Company's
traditional market channels.  In addition, the decrease in gross
profit as a percentage of revenues resulted from lower margins
associated with the Voodoo3 products sold in the three months ended
October 31, 1999 as compared with the margins of the Voodoo Banshee chip
and Voodoo2 chipsets sold in the three months ended September 30, 1998.
The Company's future gross profit will be affected by the overall level
of sales; the mix of products sold in a period; manufacturing yields;
and the Company's ability to reduce product procurement and production
costs.

<p>Research and Development.  Research and development expenses consist
primarily of compensation and other expenses related to research and
development personnel, occupancy costs of research and development
facilities, depreciation of capital equipment used in product
development and engineering costs paid to the Company's foundries in
connection with manufacturing start-up of new products.  Research and
development expenses increased 80% from $10.0 million in the three
months ended September 30, 1998 to $18.0 million in the three months
ended October 31, 1999. Included in the quarter ended October 31, 1999
is $2.6 million in research and development expenses attributable to the
operations of STB. Excluding the effect of STB, research and development
expenses increased 54% in the three months ended October 31, 1999 as
compared to three months ended September 30,1998.  This increase
reflects an increase in personnel costs, common cost allocations and
engineering costs resulting from the development of Voodoo3 and other
future products. The Company expects to continue to make substantial
investments in research and development and anticipates that research
and development expenses will increase in absolute dollars in future
periods, although such expenses as a percentage of total revenues will
fluctuate.

<p>Selling, General and Administrative.  Selling, general and
administrative expenses include compensation and benefits for sales,
marketing, finance and administration personnel, commissions paid to
independent sales representatives, tradeshow, advertising and other
promotional expenses and facilities expenses. Selling, general and
administrative expenses increased 163% from $7.0 million in the three
months ended September 30, 1998 to $18.3 million in the three months
ended October 31, 1999. The increase is primarily attributable to the
inclusion of $11.0 million in expenses relating to the operations of
STB. Excluding the effect of STB, selling, general and administrative
expenses increased 5% in the quarter ended October 31, 1999 compared to
the quarter ended September 30, 1998.  The Company expects that selling,
general and administrative expenses will increase in absolute dollars in
future periods, although such expenses as a percentage of total revenues
will fluctuate.

<p> Restructuring expense. In August 1999, the Company recorded a
restructuring charge of $1,830,000 representing a one-time reduction in
workforce related to the merger with STB.

<p>Goodwill and Other Intangibles Amortization.  In connection with the
STB merger, the Company recorded assets representing goodwill of
approximately $31.8 million and intangibles of approximately $19.1
million.  These amounts will be amortized ratably over the amortization
periods of the applicable assets.  For the three months ended October
31, 1999, the Company recorded $3.6 million in related amortization.

<p>Interest and Other Income (Expense), Net.  Interest and other income
(expense) net decreased from $13.0 million in the three months ended
September 30, 1998 to $393,000 in the three months ended October 31,
1999. The decrease is primarily related to a one-time recognition of
income in the three months ended September 30, 1998 as a result of the
settlement of litigation with Sega Enterprises, Ltd. as well as
decreased earnings from lower  invested cash balances and interest
expense on the outstanding equipment line of credit and capital lease
balances.

<p>Provision (Benefit)For Income Taxes.  The Company recorded an income
tax benefit of $6.6 million for the three months ended October 31, 1999,
at an effective tax rate equal to 27% of pretax income. The Company
recorded a provision for income taxes of $1.2 million for the three
months ended September 30, 1998, an effective tax rate of 27%. The
Company's effective tax rate in fiscal 2000 differed from the statutory
rate due to the impact of non-deductible expenses including intangible
amortization and in-process research and development.  The Company's
effective tax rate in fiscal 1998 differs from the federal statutory
rate due to utilization of net operating loss carryforwards and other
tax credits. Provision for income taxes was $7.7 million in 1998. At
December 31, 1998, 3Dfx had net operating loss carryforwards for federal
and state income tax purposes of approximately $10.7 million and $9.7
million, respectively, which expire beginning in 2011 and 2001,
respectively. Under the Tax Reform Act of 1986, the amount of and the
benefit from net operating losses that can be carried forward may be
impaired in certain circumstances. Events which may cause changes in
3Dfx's tax carryovers include, but are not limited to, a cumulative
ownership change of more than 50% over a three year period. The
completion of 3Dfx's initial public offering in June 1997 resulted in an
annual limitation of 3Dfx's ability to utilize net operating losses
incurred prior to that date. The annual limitation is approximately $5.4
million.

<p><strong>Nine Months Ended October 31, 1999 and September 30, 1998</strong></p>

<p>Revenues. The Company's total revenues were $251.1 million in the nine
months ended October 31, 1999, and $141.9 million in the nine months
ended September 30, 1998.  The increase is primarily due to board-level
sales incorporating Voodoo3 technology following the May 13, 1999,
effective date of the merger.  Revenues in the nine months ended October
31, 1999 were principally attributable to sales of the Company's Voodoo3
and Voodoo Banshee products. Substantially all of the revenues in the
nine months ended September 30, 1998 were derived from sale of the
Company's Voodoo Banshee chip and its Voodoo2 and Voodoo Graphics chipsets.

<p>Gross Profit. Gross profit as a percentage of revenues was 24% and
43% in the nine months ended October 31, 1999 and September 30, 1998,
respectively. The decrease can be primarily attributed to the gross
profit generated from the sales of board-level products, which have
lower margins as compared with the margins on chip only products.
The decrease can also be attributed to higher than expected memory prices,
expedite charges for products resulting from the recent Taiwan earthquake,
and a greater percentage of revenues generated from PC systems
manufacturers, which carry a lower gross margin than revenues
generated from the Company's traditional market channels.
In addition, the decrease in gross profit as a percentage of revenues
resulted from lower margins associated with the Voodoo3 and Voodoo
Banshee products sold in the nine months ended October 31, 1999 as
compared with the margins of Voodoo2 and Voodoo Graphics products sold
in the nine months ended June 30, 1998. The Company's future gross
profit will be affected by the overall level of sales; the mix of
products sold in a period; manufacturing yields; and the Company's
ability to reduce product procurement costs.

<p>Research and Development. Research and development expenses increased
110% from $24.2 million in the nine months ended September 30, 1998 to
$50.7 million in the nine months ended October 31, 1999. Included in the
nine months ended October 31, 1999 is $5.9 million in research and
development expenses attributable to the operations of STB following the
May 13, 1999 effective date of the merger.  Excluding the effect of STB,
research and development expenses increased 85% in the nine months ended
October 31, 1999 as compared to the nine months ended September 30,
1998.  This increase reflects the in-process research and development
write-off related to the STB merger  of $4.3 million, an increase in
personnel costs, common cost allocations and engineering costs resulting
from the development of Voodoo3 and other future products. The Company
expects to continue to make substantial investments in research and
development and anticipates that research and development expenses will
increase in absolute dollars in future periods, although such expenses
as a percentage of total revenues will fluctuate.

<p>Selling, General and Administrative. Selling, general and
administrative expenses increased 78% from $24.7 million in the nine
months ended September 30, 1998 to $44.0 million in the nine months
ended October 31, 1999. The increase is primarily attributable to the
inclusion of $21.3 million in expenses relating to the operations of STB
following the May 13, 1999 effective date of the merger.  Excluding the
effect of STB, selling, general and administrative expenses remained
relatively flat for the nine months ending October 31, 1999 as compared
to the nine months ending September 30,1998. The Company expects that
selling, general and administrative expenses will increase in absolute
dollars in future periods, although such expenses as a percentage of
total revenues will fluctuate.

<p> Restructuring expense. In August 1999, the Company recorded a
restructuring charge of $1,830,000 representing a one-time reduction in
workforce related to the merger with STB.

<p>Goodwill and Other Intangibles Amortization.  In connection with the
STB merger, the Company recorded assets representing goodwill of
approximately $31.8 million and intangibles of approximately $19.1
million.  These amounts will be amortized ratably over the amortization
periods of the applicable assets.  For the nine months ended October 31,
1999, the Company recorded $6.6 million in related amortization.

<p>Interest and Other Income (Expense), Net.  Interest and other income
(expense), net decreased from $14.6 million in the nine months ended
September 30, 1998 to $2.0 million in the nine months ended October 31,
1999. The decrease is primarily related to a one-time recognition of
income in the nine months ended September 30, 1998 as a result of the
settlement of litigation with Sega Enterprises, Ltd. as well as
decreased earnings from lower invested cash balances and interest
expense on the outstanding equipment line of credit and capital lease
balances.

<p>Provision (Benefit) For Income Taxes.  The Company recorded an income
tax benefit of $9.7 million for the nine months ended October 31, 1999,
an effective tax rate of 24%.   The Company's effective tax rate in
fiscal 2000 differed from the statutory rate due to the impact of non-
deductible expenses including intangible amortization and in-process
research and development.   The Company recorded a provision for income
taxes of $6.9 million for the nine months ended September 30, 1998, an
effective tax rate of 26%. The Company's effective tax rate in fiscal
1998 differs from the federal statutory rate due to utilization of net
operating loss carryforwards and other tax credits.

<A NAME="Y2K"></A>
<p><strong>Year 2000 Compliance</strong></p>

<p>        Like many other companies, the Year 2000 computer issue creates
risks for the Company. If internal systems do not correctly recognize
and process date information beyond the Year 1999, there could be an
adverse impact on the Company's operations. There are two other related
issues which could also lead to incorrect calculations or failures: (1)
some systems' programming assigns special meaning to certain dates, such
as 9/9/99, and (2) the Year 2000 is a leap year. As used in this
section, "Year 2000 capable" means that when used properly and in
conformity with the product information provided by the Company, and
when used with Year 2000 capable computer systems, the product will
accurately store, display, process, provide, and/or receive data from,
into, and between the twentieth and twenty-first centuries, including
leap year calculations, provided that all other technology used in
combination with the Company's product properly exchanges date data with
the Company's product.

<p>        Internal Systems. To address these Year 2000 issues with its
internal systems, the Company has initiated a program that is designed
to deal with the Company's internal management information systems and
its embedded systems (e.g. phones, and security systems). The program
included both assessment and remediation proceeding in parallel and the
Company has completed and tested changes to those management and
critical systems. These activities are intended to encompass all major
categories of systems used by the Company, including sales and financial
systems and embedded systems. 95% of the date dependencies have already
been remediated and those that have not are not mission critical
systems. In almost all cases the fixes involved updating software or
firmware. The unremediated date dependencies involve desktop
workstations, and are expected to be fully remediated by the fourth
quarter of calendar 1999.

<p>        Products. The Company has examined all versions of its products
and has determined that its products do not have any date dependencies
that could give rise to Year 2000 capability problems. The Company plans
to evaluate new products as they are developed. Because its products
have no date dependencies, the Company does not believe it is legally
responsible for costs incurred by customers related to ensuring their
Year 2000 capability.

<p>        Suppliers. The Company is also working with key suppliers of
products and services to determine whether their operations and products
are Year 2000 capable and to monitor their progress toward Year 2000
capability. The Company identified three vendors that could materially
impact the Company's business if they experienced significant Year 2000
problems. These include the Company's supplier of wafer foundry services
and the Company's two suppliers of chip packages. The Company has
obtained verbal assurances from each of these suppliers of services that
they comply with industry standards for Year 2000 readiness. The Company
has also received assurances from its three providers of
telecommunications services that their services are Year 2000 compliant.

<p>        Costs. The Company is incurring various costs to provide
customer support and customer satisfaction services regarding Year 2000
issues and it is anticipated that these expenditures will continue
through 1999 and thereafter.  The costs incurred to date related to the
Company's Year 2000 assessment and remediation programs have not been
material. The cost which will be incurred by the Company regarding the
implementation of Year 2000 compliant internal information systems,
answering and responding to customer requests related to Year 2000
issues, including both incremental spending and redeployed resources, is
currently not expected to exceed $300,000. The total cost estimate does
not include potential costs related to any customer or other claims or
the cost of internal software and hardware replaced in the normal course
of business. In some instances, the installation schedule of new
software and hardware in the normal course of business is being
accelerated to also afford a solution to Year 2000 capability issues.
The total cost estimate is based on the current assessment of the
projects and is subject to change as the project progress.  Based on
currently available information, management does not believe that the
Year 2000 matters discussed above related to internal information
technology or embedded systems of key suppliers' systems or products
sold to customers will have a material impact on the Company's financial
condition or overall trends in results of operations. However, the
Company cannot guarantee that the Year 2000 situation will not
negatively impact the Company. In addition, the failure to ensure Year
2000 capability by a supplier or another third party could have a
material adverse effect on the Company. The Company's Year 2000
compliance programs have been conducted internally, without the use
independent verification or validation processes. These assessment and
compliance programs have not caused the deferral by the Company of other
information technology projects.

<p>        The Company's most reasonably likely worst case Year 2000
scenario is that the Company experiences product procurement delays due
to Year 2000 problems. These would arise because the Company's three
major suppliers described above are located outside of the United
States. The Company has not assessed, and may not be able to assess,
what Year 2000 problems may occur with the public infrastructure,
including transportation and export systems, of these countries. Such
problems may result in delays in the Company's procuring products, which
the Company estimates may be approximately 4 weeks. The Company is in
the process of developing a contingency plan to address this scenario.
This plan will include the maintenance of a 3 to 6 week safety supply of
product. The Company expects this contingency plan to be in place by the
fourth quarter of calendar 1999.

<p>        The Company continues to have internal discussions concerning
contingency planning to address potential problem areas with internal
systems and with suppliers and other third parties. It is expected that
assessment, remediation and contingency planning activities will be
ongoing throughout 1999 with the goal of appropriately resolving all
material internal systems and third party issues.

<A NAME="liquid"></A>
<p><strong>Liquidity and Capital Resources </strong></p>

<p>As of October 31, 1999, the Company had working capital of $116.6
million including cash, cash equivalents and short-term investments of
$74.1 million.  Net cash used in operating activities in the first nine
months of fiscal 2000 was due primarily to a net loss of $31.4 million,
and decreases of $14.3 million in accounts payable and $9.1 million in
accrued expenses and increases of $7.6 million in accounts receivable,
offset by adjustments of depreciation of $9.5 million and amortization
of $6.6 million, and the in-process research and development write-off
of $4.3 million relating to the merger with STB. Net cash provided
by operating activities in the first nine months of fiscal 1998
was due primarily to net income of $19.6 million, and increases
of $22.2 million and $5.5 million in accounts payable and
accrued liabilities, respectively, partially offset by a
$21.6 million and $14.7 million increase in inventory and accounts
receivable, respectively, due to the increase in manufacturing to meet
customer demand associated with the generation of revenues.

<p>Net cash used in investing activities was approximately $23.4 million
and $17.9 million in the nine months ended October 31, 1999 and
September 30, 1998, respectively, and was due in each period to the
purchase of investments and to the purchase of property and equipment,
except in the nine months ended October 31, 1999, which includes
$9.1 million used in the merger of STB. The Company does not have any
significant capital spending or purchase commitments other than normal
purchase commitments and commitments under leases. The Company expects
capital expenditures to increase over the next several years as it
expands facilities and acquires equipment to support the planned
expansion of its operations.

<p>Net cash provided by financing activities for the nine months ended
October 31, 1999 of $7.8 million was due to the net proceeds on the
drawdown from its line of credit offset by the net repurchase of common
stock of $3.1 million and payments on its capital lease obligations.
Net cash provided by financing activities was approximately $54.4
million in the first nine months of fiscal 1998 due primarily to
proceeds from the public offering in March 1998.

<p>The Company's future liquidity and capital requirements will depend
upon numerous factors, including the costs and timing of expansion of
research and product development efforts and the success of these
development efforts, the costs and timing of expansion of sales and
marketing activities, the extent to which the Company's existing and new
products gain market acceptance, competing technological and market
developments, the costs involved in maintaining and enforcing patent
claims and other intellectual property rights, and available borrowings
under line of credit arrangements and other factors. The Company
believes that the proceeds from its March 1998 public offering, the
Company's current cash balances and cash generated from operations and
from available or future debt financing will be sufficient to meet the
Company's operating and capital requirements through at least April
2000. However, there can be no assurance that the Company will not
require additional financing within this time frame. The Company's
forecast of the period of time through which its financial resources
will be adequate to support its operations is a forward-looking
statement that involves risks and uncertainties, and actual results
could vary. The factors described earlier in this paragraph will impact
the Company's future capital requirements and the adequacy of its
available funds. The Company may be required to raise additional funds
through public or private financing, strategic relationships or other
arrangements. There can be no assurance that such additional funding, if
needed, will be available on terms attractive to the Company, or at all.
Furthermore, any additional equity financing may be dilutive to
shareholders, and debt financing, if available, may involve restrictive
covenants. Strategic arrangements, if necessary to raise additional
funds, may require the Company to relinquish its rights to certain of
its technologies or products. The failure of the Company to raise
capital when needed could have a material adverse effect on the
Company's business, financial condition and results of operations.


<A NAME="factors"></A>
<p><strong>Factors Affecting Operating Results</strong></p>


<p>The Quarterly Operating Results of the Company May Fluctuate.  The
Company's quarterly and annual results of operations have varied
significantly in the past and are likely to continue to vary in the
future. These variations are the result of a number of factors, many of
which are beyond the Company's control. These factors include:

<BLOCKQUOTE>
<UL>


  <p><LI>  The ability to successfully develop, introduce and market new or
enhanced products;

  <p><LI>  The ability to introduce and market products in accordance with
customer design requirements and design cycles;

  <p><LI>  Changes in the relative volume of sales of various products with
different margins;

  <p><LI>  Changes in demand for the Company's products and its customers'
products;

  <p><LI>  Gains or losses of significant customers or strategic
relationships;

  <p><LI>  The volume and timing of customer orders;

  <p><LI>  The availability, pricing and timeliness of delivery of components
for the Company's products;

  <p><LI>  The timing of new product announcements or introductions by
competitors;

  <p><LI>  Product obsolescence, the management of product transitions;

  <p><LI>  Production delays; and

  <p><LI>  Decreases in the average selling prices of products.

</UL>
</BLOCKQUOTE>


<p>Any one or more of the factors listed above or other factors could
cause the Company to fail to achieve its revenue and profitability
expectations. Most of the Company's operating expenses are relatively
fixed in the short term. The Company may be unable to rapidly adjust
spending to compensate for any unexpected sales shortfall, which could
materially harm quarterly operating results. As a result of the above
factors, the Company believes that investors should not rely on period-
to-period comparisons of results of operations as an indication of
future performance. The results of any one quarter are not indicative of
results to be expected for a full fiscal year.

<p>Loss of Customers or Suppliers because of STB Merger; Limited Sources
for Chips and Boards.  The STB merger caused some of 3Dfx's customers to end
or curtail their relationships with the Company because the Company's
products are now both graphics chips and graphics boards.  Thus, the
Company competes with companies that were previously 3Dfx's customers,
graphics board manufacturers. Similarly, the merger has disrupted STB's
relationships with its suppliers, some of whom were competitors of 3Dfx.
The loss of STB suppliers may cause the Company to lose customers that
want the Company's products to contain components from those suppliers.
The loss of customers of 3Dfx could cause a decline in sales for the
Company unless new sales by the combined company have an offsetting effect.

<p>    For example, two of 3Dfx's largest customers, Creative and
Diamond, were direct competitors of STB.  During 1998, sales to Diamond
(and its subsidiaries) represented approximately 32% of 3Dfx's total
revenue and sales to Creative (and its subsidiaries) represented
approximately 26% of 3Dfx's total revenue.  New products being developed
by the Company will primarily be sold directly to OEM and retail
customers rather than through Diamond and Creative.  As a result, sales
to Diamond and Creative Labs following the merger have been reduced
significantly from prior levels and these customers are no longer
customers of the Company.  Similarly, nVidia, which was a
major supplier of STB and which was a direct competitor of 3Dfx, has
terminated its relationship with the Company.  Although the Company has
continued to sell to its customers its current products that use nVidia
graphics chips, it does not expect to use nVidia's graphic chips on any
new products.  Unless the Company can persuade STB's customers that are
purchasing products using nVidia graphics chips to purchase new products
based on 3Dfx graphics chips, STB's revenue contribution to the Company
will be reduced significantly.

<p>        As a result of the merger, STB has become significantly
dependent on 3Dfx's graphics chip design and development capabilities
and 3Dfx has become more dependent on STB's graphics boards and
manufacturing capabilities. This occurred because both companies will be
more restricted in their ability to select products produced by either
STB's or 3Dfx's competitors. If either 3Dfx's graphics chips or STB's
graphics boards fail to meet the requirements of either company's
customers, the Company's relationship with those customers could be
hurt. This could negatively affect the Company's financial performance.
In addition, STB is highly dependent on 3Dfx's ability to provide
graphics chips on a timely basis meeting the rigid scheduling
requirements of OEMs. If 3Dfx's graphics chips could not be provided on
a timely basis, STB may not be able to readily find suitable alternative
graphics chips, which could result in the loss of business and customers
as well as unused manufacturing capacity.

<p>The Company Has a Limited Operating History.  The Company has been
shipping products only since the third quarter of 1996.  This limited
operating history makes the assessment of the Company's future operating
results difficult. Additionally, the Company incurred net losses of
approximately $1.7 million in 1997 and $14.8 million in 1996.  These net
losses were attributable to the lack of substantial sales and to
continuing significant costs incurred in product research, development
and testing. Additionally, the Company had net losses of $17.6 million
and $31.4 million in the three and nine months ended October 31, 1999.
Although the Company had net income of $21.7 million in 1998, $3.1
million and $19.6 million in the three and nine months ended September
30, 1998, respectively, historical growth rates may not be sustained.
Additionally, significant revenues or profitability may not be sustained
or increased on a quarterly or annual basis in the future.

<p>The Company Faces Intense Competition.  The markets in which the Company
compete are intensely competitive and are likely to become more
competitive in the future. Existing competitors and new market entrants
may introduce products that are less costly or provide better
performance or features than the Company's products. The Company does
not compete on the basis of price alone. The Company believes that the
principal competitive factors for 3D graphics products are:

<BLOCKQUOTE>
<UL>

  <p><LI>  Product performance and quality;

  <p><LI>  Conformity to industry standard application programming interfaces,
or  APIs;

  <p><LI>  Access to customers and distribution channels;

  <p><LI>  Price;

  <p><LI>  Product support; and

  <p><LI>  Ability to bring new products to the market in a timely way.

</UL>
</BLOCKQUOTE>


<p>        Many of the Company's current and potential competitors have
substantially greater financial, technical, manufacturing, marketing,
distribution and other resources than the Company. These competitors may
also have greater name recognition and market presence, longer operating
histories, lower cost structures and larger customer bases than the
Company. As a result, such competitors may be able to adapt more quickly
to new or emerging technologies and changes in customer requirements.
Prior to the merger with STB, certain of 3Dfx's principal competitors
offered a single vendor solution, because they maintain their own
semiconductor foundries and may therefore benefit from certain capacity,
cost and technical advantages.  While the merger with STB enhances the
Company's ability to compete with these competitors, the Company faces
significant risks in achieving the benefits of the merger with STB and
to the extent those benefits are not realized, these competitors
continue to pose a threat to the Company.

<p>        The Company seeks to use strategic relationships to augment its
capabilities. However, the benefits of these relationships may not be
realized or sufficient to overcome the established positions of the
Company's largest competitors as suppliers to the PC OEM and retail
markets. Regardless of the relative qualities of the Company's products,
the market power, product breadth and customer relationships of its
larger competitors can be expected to provide such competitors with
substantial competitive advantages.

<p>        The Company has traditionally competed primarily against
companies that typically have operated in the PC 2D graphics market and
that now offer 3D capability as an enhancement to their 2D solutions or
companies that have recently entered the market with an integrated 3D/2D
solution but which have not traditionally manufactured 2D solutions or
have not been involved in the market previously.  These competitors
include 3Dlabs, Inc., Ltd., ATI Technologies, Inc., nVidia Corporation,
Micron Technology, Inc., S3 Incorporated and Trident Microsystems.  The
Company also competes with Videologic Group Plc, which has partnered
with NEC to focus exclusively on developing a 3D solution for the
interactive electronic entertainment market.  Additionally, Intel has
recently entered the 3D graphics market, targeting its efforts at the
mainstream PC market.  The Company also faces potential competition from
companies that have focused on the high-end of the 3D market and the
production of 3D systems targeted for the professional engineering
market and who are now developing lower cost versions of their 3D
technology to bring workstation-like 3D graphics to mainstream
applications.  These competitors include 3Dlabs, Integraph Corporation,
Real 3D, an operating unit of Lockheed Martin Corp., and Silicon
Graphics, Inc.

<p>        In addition, as a result of the acquisition of STB, The Company
now competes with graphics board manufacturers, suppliers who sell
graphics chips directly to OEMs, OEMs who internally produce graphics
chips or integrate graphics chips on the main computer processing board
of their personal computers, commonly known as the motherboard, and from
the makers of other personal  computer components and software that are
increasingly providing graphics processing capabilities.

<p>The Company Depends on the PC Market.  For 1996, 1997 and 1998, 82%, 93%
and 100% of the Company's revenues were derived from graphics chips sold
for use in PCs.  The Company expects to continue to derive
almost all of its revenues from the sales of products for use in PCs,
although as a result of the STB merger, the Company expects to sell
graphics boards as well as graphics chips.  The PC and graphics chip and
board industries are cyclical and have been characterized by:

<BLOCKQUOTE>
<UL>

  <p><LI>  Rapid technological change;

  <p><LI>  Evolving industry standards;

  <p><LI>  Cyclical market patterns;

  <p><LI>  Frequent new product introductions and short product life cycles;

  <p><LI>  Significant price competition and price erosion;

  <p><LI>  Fluctuating inventory levels;

  <p><LI>  Alternating periods of over-capacity and capacity constraints;

  <p><LI>  Variations in manufacturing costs and yields; and

  <p><LI>  Significant expenditures for capital equipment and product
development.

</UL>
</BLOCKQUOTE>

<p>        The PC and graphics chip and board markets have also grown
substantially in recent years. However, such growth may not continue. A
decline in PC or semiconductor sales or in the growth rate of such sales
would likely reduce demand for the Company's products. Moreover, such
changes in demand could be large and sudden.  Since PC manufacturers
often build inventories during periods of anticipated growth, they may
be left with excess inventories if growth slows or if they have
incorrectly forecasted product transitions.  In such cases, the
manufacturers may abruptly stop purchasing additional inventory from
suppliers such as the Company until the excess inventory has been used.
Such suspension of purchases or any reduction in demand for PCs
generally, or for particular products that incorporate the Company's
products, would materially harm the Company's business.

<p>        In addition, the PC and graphics chip and board industries have
in the past experienced significant economic downturns at various times,
characterized by lower product demand and accelerated reduction of
product prices. The Company may experience substantial period-to-period
fluctuations in results of operations due to general semiconductor
industry conditions.

<p>Dependence on the Retail Distribution Channel.  The Company's products
have historically been distributed in the retail distribution channel.
To access the retail channel, the Company has depended on graphics board
manufacturers whose products are sold to consumers.  The Company
developed its strong presence in the retail market through its own
marketing efforts, as well as through the significant marketing efforts
of a number of customers, including Diamond and Creative Labs.  As a
result of the STB merger, the Company has lost some of its largest
customers, who were direct competitors of STB, and has become primarily
dependent on STB to support the retail sales channel.  Historically, STB
has targeted low levels of retail sales volume and has directed most of
its sales and marketing resources to the OEM sales channel.  As a
result, there may be substantial risks associated with the Company's
dependence on near-term revenues from the retail channel as the Company
transitions to direct sales in the retail channel.

<p>The Company Faces the Challenge of Growth. The Company has experienced
rapid growth and may continue to experience such growth. Growth has
placed, and is expected to continue to place, a significant strain on
the Company's managerial, operational and financial resources, including
their sales, customer support, research and development, and finance and
administrative operations.  Although some new controls, systems and
procedures have been implemented, the Company's future growth, if any,
will depend on its ability to continue to implement and improve
operational, financial and management information and control systems on
a timely basis, together with maintaining effective cost controls, and
any failure to do so could inhibit growth and harm the company.

<p>The Company Depends on New Product Development.  The markets for which
the Company's products are designed are intensely competitive and are
characterized by short product life cycles, rapidly changing technology,
evolving industry standards and declining average selling prices. The
Company's businesses will depend to a significant extent on its ability
to successfully develop new products. As a result, the Company believes
that significant expenditures for research and development will continue
to be required in the future. To succeed in this environment the Company
must anticipate the features and functionality that customers will
demand. The Company must then incorporate those features and
functionality into products that meet the design requirements of the PC
market and the timing requirements of retail selling seasons. The
success of the Company's new product introductions will depend on
several factors, including:

<BLOCKQUOTE>
<UL>


  <p><LI>  Proper new product definition;

  <p><LI>  Timely completion and introduction of new product designs;

  <p><LI>  The ability of subcontractors and component manufacturers to
effectively design and implement the manufacture of new products;

  <p><LI>  Quality of new products;

  <p><LI>  Product performance as compared to competitors' products;

  <p><LI>  Market acceptance of the Company's and its customers' products;

  <p><LI>  Competitive pricing of products; and

  <p><LI>  Introduction of new products to the market within the limited time
window for OEM design cycles and retail selling seasons.

</UL>
</BLOCKQUOTE>

<p>        As the markets for the Company's products continue to develop
and competition increases, the Company anticipates that product life
cycles will shorten and average selling prices will decline. In
particular, average selling prices and, in some cases, gross margins for
the Company's products will decline as products mature. Thus, the
Company will need to introduce new products to maintain average selling
prices and gross margins. To do this, the Company must successfully
identify new product opportunities and develop and bring new products to
market in a timely manner.  The Company has in the past experienced
delays in completing development and introduction of new products. The
failure of the Company to successfully develop and introduce new
products and achieve market acceptance for such products would
materially harm the Company's business.

<p>The Company's Products Have Short Product Life Cycles; The Company Must
Successfully Manage Product Transitions. The Company's products have
short product life cycles.  A failure by the Company to successfully
introduce new products within a given product cycle could materially
harm its business for that cycle and possibly for subsequent cycles. Any
such failure could also damage the Company's brand name, reputation and
relationships with its customers and cause longer term harm to its
business.

<p>        The PC market frequently undergoes transitions in which products
rapidly incorporate new features and performance standards on an
industry-wide basis. The Company's products must be able to support the
new features and performance levels being required by PC manufacturers
at the beginning of such a transition.  Otherwise, the Company would
likely lose business as well as the opportunity to compete for new
design contracts until the next product transition. Failing to develop
products with required features and performance levels or a delay as
short as a few months in bringing a new product to market could
significantly reduce the Company's revenues for a substantial period.

<p>        The success of the Company depends upon continued market
acceptance of its existing products, and its ability to continually
develop and introduce new products and features and product enhancements
to meet changing customer requirements. Each new product cycle presents
new opportunities for competitors of the Company to gain market share.

<p>        There are long lead times for certain components used in the
Company's products. Therefore, the Company may not be able to quickly
reduce its production or inventory levels in response to unexpected
shortfalls in sales or, conversely, to increase production in response
to unexpected demand. The Company's existing products may not continue
to be accepted by its markets and the Company may not be successful in
enhancing its existing products or identifying, developing,
manufacturing or marketing new products. Delays in developing new
products or product enhancements or the failure of such products or
product enhancements to gain market acceptance would materially harm the
Company's businesses.

<p>The Company Has Significant Customer Concentration.  The Company's sales
are highly concentrated among a limited number of customers.  Revenues
derived from sales to Dell Computer Corporation, Ingram Micro and
Gateway, Inc. accounted for approximately 13%, 12% and 11% of revenues
for the quarter ended October 31, 1999.  Revenues derived from sales
to Ingram Micro accounted for approximately 15% of the nine
months ended October 31, 1999.  Revenues derived from sales to
STB prior to the effective date of the Merger accounted for 8% of the
revenues for the nine months ended October 31, 1999. Revenues derived
from sales to Creative, Elitetron, and Guillemot accounted for
approximately 25%, 20% and 10%, respectively, of revenues for the
quarter ended September 30, 1998.  Revenues derived from Diamond,
Creative and Elitetron accounted for approximately 35%, 20% and 15%,
respectively, of revenues for the first nine months of fiscal 1998. The
Company expects  that a small number of customers will continue to
account for a substantial portion of its revenues for the foreseeable
future.

<p>        All of the Company's sales were made pursuant to purchase
orders. This lack of long-term commitments, together with the customer
concentration noted above, pose a significant risk. If a single customer
of the Company cancels an order or ceases to be a customer, the
Company's business and financial condition could be materially harmed.
As a result of the merger with STB, the Company has lost several of its
current customers.  See "Overview" above for a fuller discussion of the
effect of the merger on the Company's customer base.

<p>The Company Has Significant Product Concentration.  The Company's
revenues are dependent on the markets for 3D/2D and 3D media processors
and graphics boards for PCs and on the Company's ability to compete in
those markets. Since the Company has no other products, the Company's
business would be materially harmed if it were unsuccessful in selling
these products.

<p>The Company Depends on Independent Manufacturers and Other Third
Parties.  The Company's graphics chip products require wafers
manufactured with state-of-the-art fabrication equipment and techniques.
The Company does not manufacture the semiconductor wafers used for its
graphics chip products and does not own or operate a wafer fabrication
facility.  Taiwan Semiconductor Manufacturing Company, or TSMC,
currently manufactures all of the Company's wafers in Taiwan.  The
Company obtains manufacturing services from TSMC on a purchase order
basis. The Company depends on TSMC to:

<BLOCKQUOTE>
<UL>

  <p><LI>  Produce wafers of acceptable quality and with acceptable
manufacturing yields;

  <p><LI>  Deliver those wafers to the Company and its independent assembly
and
testing subcontractors on a timely basis; and

  <p><LI>  Allocate to the Company a portion of their manufacturing capacity
sufficient to meet the Company's needs.

</UL>
</BLOCKQUOTE>

<p>        The Company expects to continue to be dependent upon TSMC in the
future.  The Company has no readily available alternative source of
supply and it could take several months to establish a strategic
relationship with a new manufacturing partner. Therefore, a
manufacturing disruption experienced by TSMC would impact the production
of the Company's graphics chip products for a substantial period of
time.  Additionally, TSMC fabricates wafers for other companies and
could choose to prioritize capacity for other uses or reduce or
eliminate deliveries to the Company on short notice. Any disruption in
the Company's access to TSMC's production capacity would materially harm
the Company's business.

<p>        There are many other risks associated with the Company's
dependence upon third party manufacturers, including:

<BLOCKQUOTE>
<UL>


  <p><LI>  Reduced control over delivery schedules, quality assurance,
manufacturing yields and cost;

  <p><LI>  The potential lack of adequate capacity during periods of excess
demand;
  <p><LI>  Limited warranties on wafers supplied to the Company; and

  <p><LI>  Potential misappropriation of the Company 's intellectual property.

</UL>
</BLOCKQUOTE>

<p>        The Company's graphics chip products are packaged and tested by
two third party subcontractors on a purchase order basis rather than
under a long-term agreement.  As a result of its reliance on these
subcontractors to assemble and test its graphic chips products, the
Company cannot directly control product delivery schedules. This could
lead to product shortages or quality assurance problems that could
increase the costs of manufacturing or assembly of the Company's
graphics chip products. A significant amount of time is required to
qualify assembly and test subcontractors. Therefore, product shipments
could be delayed significantly if the Company is required to find
alternative subcontractors. And problems associated with the delivery,
quality or cost of the assembly and testing of the Company's products
could materially harm the Company's business.

<p>Semiconductor Manufacturers Experience Manufacturing Yield Problems. The
fabrication of semiconductors is a complex and precise process that
often experiences problems that are difficult to diagnose and time
consuming or expensive to solve. As a result, semiconductor companies
often experience problems in achieving acceptable wafer manufacturing
yields.  These yields reflect the number of good die as a proportion of
the total number of die on any particular wafer. Once production yields
for a product stabilize, the Company pays an agreed price for wafers
meeting certain acceptance criteria pursuant to a "good die" only
pricing structure for that product. Until production yields for a
product stabilize, however, the Company must pay an agreed price for
wafers regardless of yield. Accordingly, in this latter circumstance,
the Company bears the risk of final yield of good die. Poor yields would
materially harm the Company's business.

<p>Semiconductor manufacturing yields are a function of both product
design, which is developed largely by the Company, and process
technology, which is typically proprietary to the manufacturer. Low
yields may result from either design or process technology failure.
Thus, yield problems may not be determined or resolved until an actual
product exists that can be analyzed and tested to identify process
sensitivities relating to the design rules that are used. As a result,
yield problems may not be identified until well into the production
process. At that point, resolution of yield problems would require
cooperation by and communication between the Company and the
manufacturer. The offshore location of the Company's manufacturer
compounds this risk because it increases the effort and time required to
identify, communicate and resolve manufacturing yield problems. As the
Company's relationships with TSMC and any additional manufacturing
partners develop, yields could be harmed from difficulties in adapting
the Company's technology and product design to the proprietary process
technology and design rules of each manufacturer.

<p>        The Company's manufacturers may not achieve or maintain
acceptable manufacturing yields in the future.  Because of the Company's
potentially limited access to wafer fabrication capacity from its
manufacturers, any decrease in manufacturing yields could result in an
increase in the Company's per unit costs and force the Company to
allocate its available product supply among its customers. Such an
allocation could potentially adversely impact customer relationships as
well as revenues and gross profit. Any inability of the Company to
achieve planned yields from its manufacturers could materially harm the
Company 's business.  The Company also faces the risk of product recalls
resulting from design or manufacturing defects which are not discovered
during the manufacturing and testing process. In the event of a
significant number of product returns due to a defect or recall, the
Company's revenues and gross profit could be materially harmed.

<p>The Company Faces Risks Relating to Intellectual Property.  The Company
relies primarily on a combination of patent, mask work protection,
trademarks, copyrights, trade secret laws, employee and third-party
nondisclosure agreements and licensing arrangements to protect its
intellectual property. If these efforts are not sufficient to protect
the Company's intellectual property, the Company's business may be
harmed. Many foreign jurisdictions offer less protection of intellectual
property rights than the United States. Therefore, the protection
provided to the Company's proprietary technology by the laws of foreign
jurisdictions may not be sufficient to protect its technology.

<p>        The semiconductor industry is characterized by vigorous
protection and pursuit of intellectual property rights or positions and
it is common in the PC industry for companies to assert intellectual
property infringement claims against other companies. Therefore, the
Company's products may become the target of infringement claims. If that
were to occur, the Company may be required to spend significant time and
money to defend its products, redesign its products or develop or
license a substitute technology. Any of these events could materially
harm the Company's business. Litigation by or against the Company could
result in significant expense to the Company and could divert the
efforts of the Company's technical and management personnel, regardless
of the outcome of such litigation.

<p>The Company's International Operations Are Subject to Certain Risks.
The Company relies on foreign third-party manufacturing, assembly and
testing operations that are located in Asia. In addition, the Company
has significant export sales. These international operations subject the
Company to a number of risks associated with conducting business outside
of the United States. These risks include:

<BLOCKQUOTE>
<UL>

  <p><LI>  Unexpected changes in legislative or regulatory requirements;

  <p><LI>  Delays resulting from difficulty in obtaining export licenses for
certain technology;

  <p><LI>  Tariffs, quotas and other trade barriers and restrictions;

  <p><LI>  Longer accounts receivable payment cycles;

  <p><LI>  Difficulties in collecting payment;

  <p><LI>  Potentially adverse tax consequences, including repatriation of
earnings;

  <p><LI>  Burdens of complying with a variety of foreign laws;

  <p><LI>  Unfavorable intellectual property laws;

  <p><LI> Political instability; and

  <p><LI>  Foreign currency fluctuations.

</UL>
</BLOCKQUOTE>

<p>        Any of these factors could materially harm the international
operations and sales of the Company, and consequently, its business.
Recently, the financial markets in Asia have experienced significant
turmoil, which could harm the Company's international sales or
operations. Currently, all of the Company's product sales and its
arrangements with its foundry and assembly and test vendors provide for
pricing and payment in U.S. dollars. To date, the Company has not
engaged in any currency hedging activities, although the Company may do
so in the future. An increase in the value of the U.S. dollar relative
to foreign currencies could make the Company's products more expensive
and potentially less competitive in foreign markets.

<p>The Company's Stock Price May Be Volatile; Securities Class Action
Litigation..  The trading price of the Company's Common Stock has in the
past fluctuated and could in the future fluctuate significantly. The
fluctuations have been or could be in response to numerous factors,
including:

<BLOCKQUOTE>
<UL>

  <p><LI>  Quarterly variations in results of operations;

  <p><LI>  Announcements of technological innovations or new products by the
Company, its customers or competitors;

  <p><LI>  Changes in securities analysts' recommendations;

  <p><LI>  Earnings estimates for the Company; and

  <p><LI>  General fluctuations in the stock market.


</UL>
</BLOCKQUOTE>

<p>        The Company's revenues and results of operations may be below
the expectations of public market securities analysts or investors. This
could result in a sharp decline in the market price of the Company's
Common Stock.  In addition, stock markets have from time to time
experienced extreme price and volume fluctuations. The market prices for
high technology companies have been particularly affected by these
market fluctuations and such effects have often been unrelated to the
operating performance of such companies. These broad market fluctuations
may cause a decline in the market price of the Company's common stock.

<p>In the past, following periods of volatility in the market price
of a company's stock, securities class action litigation has been
brought against the issuing company. It is possible that similar
litigation could be brought against the Company. Such litigation could
result in substantial costs and would likely divert management's
attention and resources. Any adverse determination in such litigation
could also subject the Company to significant liabilities.  A securities
class action lawsuit of this type was filed on October 9, 1998 in Dallas
County, Texas against STB and certain of its officers and directors,
along with the underwriters who participated in STB's public offering on
March 20, 1998.  The lawsuit alleges that the registration statement for
STB's secondary public offering contained false and misleading
statements of material facts and omitted to state material facts,
alleging that the registration statement failed to disclose certain
alleged STB product defects, alleged difficulties with some of STB's
major customers and STB's allegedly deteriorating financial performance.
The lawsuit seeks recission and/or unspecified damages. The Company
denies the allegations in the lawsuit and intends to vigorously defend
the lawsuit. In the event the plaintiffs in the lawsuit prevail in
connection with any of their claims, then, depending upon the magnitude
of damages and expenses incurred by the Company and the extent to which
such damages and expenses are covered by insurance, the lawsuit could
have a negative effect on the financial condition and results of the
Company.

<p>Risks Associated with Year 2000 Compliance.  The Company uses a
significant number of computer software programs and operating systems
in its internal operations. These include applications used in financial
business systems and various administration functions, and also software
programs in their products. If these software applications are unable to
appropriately interpret dates occurring in the upcoming calendar year
2000, some level of modification or replacement of such software may be
necessary. The Company believes that all of its existing products are
Year 2000 compliant and has conducted or is conducting Year 2000
compliance testing. Despite such belief, the Company's products may not
be Year 2000 compliant. If the Company's products fail to perform,
including failures due to the onset of calendar year 2000, its business
would likely be materially harmed.

<p>        Any Year 2000 problems could materially harm the Company's
business. In addition, the Company's customers and suppliers
may not be year 2000 compliant, which could materially harm the
Company's business. See "Year 2000 Compliance" above for discussion of
the Company's efforts in evaluating, testing and correcting Year 2000
compliance issues.

<p>The Company Depends on Third Party Developers and Publishers.  The
Company believes that the availability of numerous high quality,
commercially successful software entertainment titles and applications
significantly affects sales of its graphics chips and boards.  The
Company depends on third party software developers and publishers to
create, produce and market software titles that will operate with its
products.  Only a limited number of software developers are capable of
creating high quality entertainment software. Competition for these
resources is intense and is expected to increase. Therefore, a
sufficient number of high quality, commercially successful software
titles compatible with the Company's products may not be developed.  In
addition, the development and marketing of game titles that do not fully
demonstrate the technical capabilities of the Company's products could
create the impression that the Company's technology offers only marginal
performance improvements, if any, over competing products.

<p>        The Company's success will be substantially affected by the
adoption by software developers of Glide, its proprietary, low-level 3D
API. Although the Company's products support game titles developed for
most industry standard APIs, the Company believes that Glide currently
allows developers to fully exploit the technical capabilities of the
Company's products. Glide competes with APIs developed or expected to be
developed by other companies having significantly greater financial
resources, marketing power, name recognition and experience than the
Company. For example, certain industry standard APIs, such as
Microsoft's D3D and SGI's OpenGL, have a much larger installed customer
base and a much larger base of existing software titles. Developers may
face additional costs to port games developed on other standard APIs to
Glide for play on the Company's architecture. There can be no assurance
that Glide will be adopted by a sufficient number of software developers
or that developers who have used Glide in the past will continue to do
so in the future.

<p>Risks related to Environmental Regulation.  The production and
manufacture of certain of the Company's products requires the use of
toxic and other hazardous substances. If the Company does not comply
with all local, state, federal and foreign governmental regulations
relating to the storage, use and disposal of these substances,
substantial monetary fines could be levied  against the Company or the
production of the Company's products could be suspended, resulting in
product delivery delays, cancelled product orders, decreased revenue and
negative financial results.

<p>Dependence on Third-Party Certification.  The Company submits most of
its graphics board products for compatibility and performance testing to
the Microsoft Windows Hardware Quality Lab because OEM customers
typically require such products to have this certification prior to
making volume purchases. This certification typically requires up to
several weeks to complete and entitles the Company to claim that a
particular product is "Designed for Microsoft Windows."  The Company may
not receive this certification for future products in a timely fashion,
which could result in product shipment delays and lost sales.
Dependence on Single Manufacturing Facility for Graphics Boards.  In
connection with the acquisition of STB, the Company also acquired STB's
sole manufacturing facility, which is located in Juarez, Mexico.  Since
the Company is dependent on this single manufacturing facility for the
manufacture of graphics board products, any disruption of manufacturing
operations at this facility would have far reaching negative
consequences. A disruption could result from various factors, including
difficulties in attracting and retaining qualified manufacturing
employees, difficulties associated with the use of new, reconfigured or
upgraded manufacturing equipment, labor disputes, human error,
governmental or political risks or a natural disaster such as an
earthquake, tornado, fire or flood.

<p>        In comparison to those of its competitors that do not maintain
their own manufacturing facilities, the Company incurs higher relative
fixed overhead and labor costs as a result of operating its own
manufacturing facility. Any failure to generate the level of product
revenues needed to absorb these overhead and labor costs would
negatively affect the Company's financial results.

<p>Risks related to Changes in Product Mix.  The Company offers three broad
categories of products:  (i) graphics boards and other multimedia
subsystems that are primarily sold to major original equipment
manufacturers, or OEMs, and, to a lesser degree, to commercial
customers,  (ii) specialized technology products that are primarily sold
to resellers, the workstation groups of OEMs and corporate customers in
certain industries and (iii) graphics chips sold for inclusion in other
companies products.  As a result of the varying gross profit margins
associated with its products and sales channels, shifts in the mix of
products sold or in the sales channels into which such products are sold
could significantly harm the Company's gross profits and gross profit
margins. For example, a decrease in sales of graphics boards and other
multimedia subsystems to the commercial market or in sales of
specialized technology products could result in a disproportionately
greater decrease in the Company's gross profit margin. This is because
these sales currently have higher gross profit margins than sales of
graphics boards and other multimedia subsystem products to the Company's
OEM customers. On the other hand, any decrease in the volume of graphics
boards and other multimedia subsystems sold to the Company's OEM
customers would significantly reduce total net sales and negatively
impact the Company's financial results.


<br>
<br>
<HR WIDTH="85%">
<br>
<br>

<p align="center"><strong>
                               PART II - Other Information
</strong></p>




<p><strong>Item 6: Exhibits</strong></p>
<BLOCKQUOTE>
<p>(a)     Exhibits
<BLOCKQUOTE>
<p>27.1            Financial Data Schedule
</BLOCKQUOTE>
<p>(b)     Financial Statements Schedule
<BLOCKQUOTE>
<p>        Schedule II - Valuation and Qualifying Accounts

<p><strong>Reports on Form 8-K</strong></p>

On October 13, 1999, the Registrant filed a report on Form 8-K relating
to the resignation of L. Gregory Ballard, its Chief Executive Officer
and President.



</BLOCKQUOTE>
</BLOCKQUOTE>

<br>
<br>
<HR WIDTH="85%">
<br>
<br>

<A NAME="sign"></A>
<p align="center"><strong>

                              3DFX INTERACTIVE, INC.<br>
<br>
<br>
                                   SIGNATURES
</strong></p>
<p>&nbsp;&nbsp;&nbsp;&nbsp;     Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.

<p>Dated: December 15, 1999

<P>
<TABLE border=0 cellPadding=0 cellSpacing=0 width="100%">
  <TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left>
                              3DFX INTERACTIVE, INC.
</TD></TR></TABLE>

<TABLE border=0 cellPadding=0 cellSpacing=0 width="100%">
  <TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left>
<I>(Registrant)</I>
</TD></TR></TABLE>

<P>
<TABLE border=0 cellPadding=0 cellSpacing=0 width="100%">
  <TR>
    <TD width="38%"></TD>
    <TD width="2%"></TD>
    <TD width="60%"></TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align=left>
                                          /s/ ALEX LEUPP
</TD></TR></TABLE>


<TABLE border=0 cellPadding=0 cellSpacing=0 width="100%">
  <TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left>
      <HR align=left SIZE=1>
    </TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left>
                                          Alex Leupp
</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left><I>
                                          Chief Executive Officer
</I></TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left><I>
                                          (Principal Executive Officer)
  </I></TD></TR></TABLE></P>

<P>
<TABLE border=0 cellPadding=0 cellSpacing=0 width="100%">
  <TR>
    <TD width="38%"></TD>
    <TD width="2%"></TD>
    <TD width="60%"></TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align=left>
                                          /s/ DAVID ZACARIAS
</TD></TR></TABLE>


<TABLE border=0 cellPadding=0 cellSpacing=0 width="100%">
  <TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left>
      <HR align=left SIZE=1>
    </TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left>
                                          David Zacarias
</TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left><I>
                                          Vice President, Administration
                                          and Chief Financial Officer
</I></TD></TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD align=left><I>
(Principal Financial and Accounting Officer)
  </I></TD></TR></TABLE></P>




<br>
<br>
<HR WIDTH="85%">
<br>
<br>





<p align="center"><strong>
          FINANCIAL STATEMENTS SCHEDULE<br>

                             3DFX INTERACTIVE, INC.<br>
 <br>
                        Valuation and Qualifying Accounts<br>
              For the nine months ended October 31, 1999 and September 30, 1998<br>
                                (in thousands)
</strong></p>
<pre>

                                            Additions
                                       ---------------------
                                       Charged to  Charged
                             Beginning Costs and   to Other              Ending
                              Balance   Expenses   Accounts  Deductions  Balance
---------------------------- --------- ---------- ---------- ---------- ---------
Allowance for Doubtful
Accounts:
  For the nine months
   ended October 31, 1999...   $3,666     $2,653     $ 6,726    $2,815   $10,230

  For the nine months
   ended September 30, 1998.     $308     $1,836     $ --         $275    $1,869

Inventory Reserve:
  For the nine months
   ended October 31, 1999...   $7,828     $  --      $ 16,230   $4,825   $19,233

  For the nine months
   ended September 30, 1998.     $661    $10,567     $ --       $1,047   $10,181




</pre>


<br>
<br>
<HR WIDTH="85%">
<br>
<br>


<p align="center"><strong>
                               INDEX TO EXHIBITS
</strong></p>


<p><u>EXHIBITS</u>


<p>&nbsp;&nbsp;&nbsp;&nbsp;    27.1  Financial Data Schedule

<br>
<br>

</body>
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<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>2
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE>      5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS, CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S>                                           <C>
<PERIOD-TYPE>                                 9-MOS
<FISCAL-YEAR-END>                             JAN-31-2000
<PERIOD-START>                                FEB-01-1999
<PERIOD-END>                                  OCT-31-1999
<CASH>                                             59,487
<SECURITIES>                                       14,610
<RECEIVABLES>                                      87,764
<ALLOWANCES>                                       10,230
<INVENTORY>                                        41,286
<CURRENT-ASSETS>                                  208,736
<PP&E>                                             68,456
<DEPRECIATION>                                     27,555
<TOTAL-ASSETS>                                    307,041
<CURRENT-LIABILITIES>                              92,100
<BONDS>                                                 0
<PREFERRED-MANDATORY>                                   0
<PREFERRED>                                             0
<COMMON>                                          249,497
<OTHER-SE>                                        (36,557)
<TOTAL-LIABILITY-AND-EQUITY>                      307,041
<SALES>                                           251,136
<TOTAL-REVENUES>                                  251,136
<CGS>                                             191,122
<TOTAL-COSTS>                                     191,122
<OTHER-EXPENSES>                                  103,061
<LOSS-PROVISION>                                        0
<INTEREST-EXPENSE>                                      0
<INCOME-PRETAX>                                   (41,059)
<INCOME-TAX>                                       (9,658)
<INCOME-CONTINUING>                               (31,401)
<DISCONTINUED>                                          0
<EXTRAORDINARY>                                         0
<CHANGES>                                               0
<NET-INCOME>                                      (31,401)
<EPS-BASIC>                                       (1.48)
<EPS-DILUTED>                                       (1.48)



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