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ATI reports record Q1 sales, profits

Rage Pro Turbo, Rage 128 lead sales to PC vendors

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Graphics specialist ATI today reported record results for its first quarter of fiscal 1999. The company posted sales of $327.4 million, up 95 per cent on the same period last year, leading to profits of $52 million, a year-on-year increase of 112 per cent on the $24.5 million it made in Q1 1998. In fact, ATI's Q1 profits is closer to $50.1 million, thanks to costs deriving from the $70.9 million hit it's taking for the acquisition of PC-on-a-chip developer Chromatic Research. The company also warned it will be making further charges of $16 million for the next three quarters as a result of the purchase. That said, the outlook for ATI continues to appear very positive. ATI has always made most of its money from selling graphics acceleration chip-sets to PC manufacturers, rather than through the retail sale of graphics cards containing those chips. The massive growth in the 3D graphics add-in market over the last 18 months has encouraged more PC vendors to bundle sophisticated 3D technologies with their systems, and ATI has prospered accordingly, largely thanks to its Rage Pro and Rage Pro Turbo accelerators which brought the performance of the company's product line much closer to the leading retail add-ins. The Rage 128, which began shipping in volume at the beginning of the year and offers superior performance to 3Dfx's Voodoo 2, will extend that further. Apple is already shipping Rage 128 cards with every model in its professional Power Mac line. Rage Pro Turbo chip-sets drive the iMac and systems from Sun, Compaq, Dell, HP, NEC and Packard-Bell. ATI is also pushing its Rage Mobility notebook graphics acceleration range hard. Still, 3Dfx remains a potential trouble-maker, thanks to its dominance of the 3D market and its acquisition of board-maker STB. With 3Dfx set to release its next-generation Voodoo3 chip-set in the second quarter of 1999 and target it at the high-end games enthusiast market (see 3Dfx announces next-generation Voodoo), that leaves it plenty of scope to target Voodoo 2 and Voodoo Banshee-based boards at STB's PC vendor customers -- many of whom are now ATI customers. With Voodoo stable in its role as the graphics standard against which other chip-sets are measured, 3Dfx is in a good position to win back many of the customers STB lost to ATI. ®

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