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ATI exceeds expectations

But warns of tough times ahead

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ATI did a little better than its own predictions and analysts' expectations would have led us to believe when it released its Q1 2001 fiscals yesterday.

The graphics chip company made a profit of $11.8 million or five cents a share, above the three cents a share Canadian analysts had anticipated and Wall Street's four cents a share. The quarter, which ended 30 November 2000, saw revenues reach $350.5 million.

Both figures are well down on the year-ago quarter, which recorded revenues of $413.5 million and earnings of $54.5 million (25 cents a share).

That's based on net income - factoring in one-off items, ATI lost $45 million (seven cents a share) in its most recently completed quarter, compared to profits of $53.6 million in Q1 2000. Q1 2001's biggest one-off item related to the company's purchase of ArtX.

It blamed the fall in revenue on tougher competition - step forward, Nvidia - and a shift on the part of European OEMs to integrated graphics products rather than discrete add-in cards.

Looking ahead, ATI warned that the current quarter, due to be completed at the end of February, will generate small revenues still, down to $300 million and, despite the $5 million the company shaved off its costs during Q1 and the three per more it expects to cut in Q2, it will only break even, after adjustments.

ATI expects sales of $1.2-1.3 billion for 2001 as a whole, a little less than 2000's $1.4 billion and well under previous analyst predictions of $1.6 billion.

How ATI performs over the next few quarters will depend on the state of the PC market and thus manufacturer's demand for its graphics parts. And with PC margins falling, vendors will be looking to spend less on components such as graphics chips.

ATI is expected to rev-up its Radeon line during the year, and spring should see the launch of fresh, Radeon-based integrated graphics and North Bridge chip-sets plus system-on-a-chip parts, which should allow it to tackle the low-end PC market more effectively. ®

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