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ATI Posts Strong Q3 Results, Reports Mysterious $18 Million Contract Pre-Payment

ATI Technologies announced results for the third fiscal quarter yesterday, posting better-than-expected results.
Revenue rose to $342.1 million, up from $266.2 million last year. Net income was $12.4 million (5 cents per share), compared with a loss of $1.95 million (1 cent per share) a year ago. The company said that all product areas were successful during the quarter, including high-end desktop, discrete mobile, mobile integrated and add-in-boards. In addition, margins climbed to 32%, from 28% in the previous quarter. During the quarter, ATI took a $2.3 million charge to cover expenses relating to an Ontario Securities Commission investigation into alleged insider trading by ATI executives, including ATI chairman and CEO, K.Y. Ho and his wife. No OSC judgement has been made in the case, yet. Of interest was a pre-payment of $18 million that ATI recorded as "deferred revenue associated with an unannounced contract". ATI executives declined to explain what that contract was for. However, it may fuel speculation of an ATI design win for the next Xbox. An item on Spong.com last week claimed that ATI had secured an agreement to provide graphics hardware for the Xbox's successor, after relations between Nvidia and Microsoft soured. None of the companies involved would comment on the rumor, however. Shares rose 15% in early trading today, to $9.84 on the Nasdaq exchange.

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