Wait, so what went wrong? They took too long to release new product? That's not surprising to anyone watching at the time. But… why? What went wrong internally?
I think it was the failed merger with STB. They should have kept with the nVidia route of making chips for other companies instead of trying to integrate the entire pipeline like ATI.
Yes, this. They tried to go from being a company that just licensed IP to OEMs (who would do the actual manufacturing and marketing of 3dfx-powered graphics cards) to being a company that did the manufacturing and marketing themselves, and in the end couldn't pull that off.
Acquiring one of the more prominent OEMs, STB, was supposed to get them the expertise they needed to do that rather than having to develop it in-house, but (as in many acquisitions) absorbing the new company turned out to be more complicated than originally expected. This resulted in the post-acquisition products (Voodoo 3/4/5) taking longer to get to market than planned and being somewhat underwhelming by the time they did arrive, which gave NVidia -- who kept on licensing their tech, now also to grumpy former 3dfx OEMs who had found themselves cut out by the STB acquisiton -- the opening they needed to eat 3dfx's lunch.
