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ATI slumps on Compaq loss

Supply problems, dear?

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Another day, another stock market disaster for ATI, the graphics card market leader. Its share price slumped 8.55 per cent to $C16.55 and more than 5.4 million shares were traded yesterday on the Toronto Stock Exchange on news that it had lost a supply contract with Compaq. Could there be any connection with the supply win for Compaq Presarios announced yesterday by 3dfx? Maybe not -- the timing looks purely coincidental, according to sources, who say Nvidia replaced the ATI SKU. Market reaction may have been a tad overdone, for the Compaq ATI deal was worth only $1 million a quarter, according to one analyst. But the loss comes only weeks after ATI lost a big contract with Dell, worth an estimated $10 million a quarter. The winner still hasn't been announced -- but speculation at the time centred round Nvidia. But don't be surprised -- a reader tells us -- if it ain't good old Intel and it's good old i810 that walked away with that business. An interview with Michael Dell in Canada's Globe and Mail at the weekend also appears to have stirred up a hornet's nest for ATI, according to Reuters reports. ATI "had some problems in meeting our schedules...and we found other suppliers that could better meet (these) schedules," Dell told the newspaper. "We're actually a big customer of ATI and continue to be". It's inevitable that ATI is going to lose OEM supply contracts from time to time. But that didn't use to be the case. The company rose without trace to become the world's biggest supplier of graphic cards, on the back of its dominance in the OEM market. Now it has hot performance brand Nvidia snapping at its heels for OEM contracts, and further down the food chain the 3dfx/STB and Savage/Diamond combos are also putting in credible bids for this business. ® Related story Dead Dell deal costs ATI dearly

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