Feeds

ATI stock tumbles on earnings fears

It's not going to get any better any time soon

  • alert
  • submit to reddit

Secure remote control for conventional and virtual desktops

ATI's shares fell 16 per cent on the Canadian stock exchange yesterday on investor fears that the 3D graphics market leader is going to see a significant shortfall in earnings.

ATI's shares closed at C$13 ($8.80) after hitting a low of C$12 ($8.16), just 20 cents above its year-low of C$11.80. ATI stock also trades on Nasdaq, and ended the day at 8.875.

During the day, UBS Warburg Dillon Read downgraded ATI's stock from 'buy' to 'hold'. UBS cut its 12-month shareprice target by $1 to $11, fiscal 2000 earnings four cents to 31 cents a share and 2001 earnings from 55 cents a share to 36 cents, according to Reuters.

Revenue estimates were reduced for fiscal 2000 to $1.35 billion from $1.38 billion. For 2001, the new estimate is $1.6 billion, down from $1.75 billion.

ATI itself is aware of the problem, having predicted it will lose 6-7 cents a share for Q3 2000 - a marked change on the 13-14 cents a share profit it had originally been anticipating. The reason: a price war and rising component costs, both conspiring to nuke ATI's margins.

Meanwhile, Nvidia has been pulling in some significant OEM deals - the kind of business ATI thrived upon - through its aggressive six-monthly new product roll-out schedule. Nvidia is pretty much the only 3D company that's been able to ship new, more advanced graphics chips on a regular basis. 3dfx has only just begun shipping the Voodoo 4 and 5 - the best part of a year late, and ATI's successor to the popular Rage 128, the Radeon, isn't due to ship until the summer - the 128 has been around since late 1998, apart from the Pro upgrade.

By contrast, Nvidia has shipped two 256-bit GeForce parts - the GeForce 256 and, in April, the GeForce 2 - in the last 12 months alone. That has allowed it to keep its older TNT and TNT 2 chips moving smoothly downmarket to enable it to pitch at various OEM price points.

And, as a company dedicated to chip production, Nvidia isn't as strongly affected by component costs as its board-producing rivals are.

ATI does have strong OEM relationships, but it does need to accelerate its product development cycle. Getting Radeon out of door will allow it to push Rage 128 and Rage 128 Pro further down. Will that be enough to get ATI out of its present difficulty? Probably not. Intel's graphics-integrated Timna CPU and similar SoC products from Via (thanks to its purchase of S3's graphics chip operation) threaten to limit the room for manoeuvre lower end of the OEM market, increasing competition at the higher end.

And ATI just doesn't have the reputation of 3dfx or Nvidia for coming out with cutting edge kit for serious gamers - good though its products are - to make a big play for that end of the market. Though it's going to have a damn good try with Radeon.

The upside is that 3D acceleration seems now pretty much de rigueur on mid-range PCs, and that expands the scope ATI and its rivals have to sell to OEMs. ®

5 things you didn’t know about cloud backup

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
Banking apps: Handy, can grab all your money... and RIDDLED with coding flaws
Yep, that one place you'd hoped you wouldn't find 'em
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
Ex-IBM CEO John Akers dies at 79
An era disrupted by the advent of the PC
prev story

Whitepapers

Gartner critical capabilities for enterprise endpoint backup
Learn why inSync received the highest overall rating from Druva and is the top choice for the mobile workforce.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.