ATI reports Q3 loss, bullish on 2003

In line with analysts' estimates, graphics chip and card maker ATI Technologies Inc. reported a third-quarter loss Wednesday of about US$2 million.

The numbers stand in sharp contrast to the same quarter a year ago, when ATI posted a $27 million loss. The company noted that revenues increased marginally from $266.0 million from Q2 to $266.2 million for Q3. Gross margin improved slightly as well, rising 1.2 percent to 35.0 percent. Operating expenses dropped as well, to $69.2 million from $69.8 million last quarter.

ATI president and COO David Orton said that his company is successfully executing "an aggressive strategy" of new product introductions aimed at PCs and consumer digital products.

"Over the past few months we announced a significant number of notebook wins, launched our new integrated graphics processor line of products, and began to show the world what ATI has in store for the desktop PC, set top box, and PDA markets," said Orton. Orton also said that ATI would introduce a "next generation" of products.

ATI's graphics products are used in both Macs and PCs. While it's seen its monopoly hold on the Mac disappear with the advent of Nvidia chips on the Power Mac, iMac and eMac lines this past year, ATI still provides Apple with technology used on some Power Mac models and on its PowerBook and iBook computers as well as CRT-based iMacs. ATI also manufactures graphics hardware used by Nintendo in its popular GameCube video game console.

Despite the moderate loss, ATI's balance sheets strengthened for the quarter, with cash reserves increasing from US$249 million to $265.7 million. ATI chair and CEO K.Y. Ho said that this is an indication that ATI is meeting its goals.

ATI senior vice president and CFO Terry Nickerson said that the company expects to see "market softness" in its fiscal fourth quarter, but anticipates a strong fiscal 2003 thanks to new product revenue and seasonal strength from Nintendo. ATI anticipates revenue to be flat to slightly down, with gross margins in the 32 to 35 percent range as the company transitions to new products. ATI told investors to look for net income per share to be in the $0.05 to $0.07 range.

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Peter Cohen

PC World
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