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ATI Reports Disappointing Third Quarter

Officials from graphics chip designer ATI Technologies have released the company’s third quarter results, for the period ended May 31st, revealing slightly disappointing ...
Officials from graphics chip designer ATI Technologies have released the company’s third quarter results, for the period ended May 31st, revealing slightly disappointing results which are largely in line with recently revised forecasts. During the third quarter the company reported a net loss of $445,000, compared to a net income of $48.6 million at the same time last year. Excluding stock-based compensation costs and related taxes, income was $8.5 million compared to a figure of $50.5 million the previous year. Despite these results, revenue for the company was up by 8 percent on 2004 to $530 million. Sales of PC graphics hardware made up 87 percent of sales, and rose by 6 percent. Revenue in the consumer segment, which includes consoles, digital televisions, mobile phones and other handheld devices rose by 20 percent. Gross margin, the percentage of sales left after subtracting manufacturing costs, was hurt by sales of desktop integrated chips, though, which have margins well below the corporate average. Profits were further dented by lower-than-expected yields on some products due to manufacturing problems. "It was a challenging quarter for ATI, particularly within our PC business where we came in well below our expectations for both revenue and gross margin," chief executive David Orton said in a statement. What has particularly hurt the company’s share price, however, is the revising down again of fourth quarter sales estimates, from $600 million to $550-$580 million. The company will likely be hoping that the release of the Xbox 360 later this year, for which it provides the graphics chipset, will help to improve the company’s fortunes and decrease the reliance on PC products.

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