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ATI blames PC industry woes for profit collapse

Cash balance 'strong'

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ATI, graphics card OEM to the World+Dog, has revised its Q2 sales and profits estimates sharply downwards.

The company says that it will post sales of $230m - below guidance estimates published on January 11. The shortfall is blamed on "weaker personal computer sales worldwide".

It also expects to post a loss of between 10 and 13 cents a share for the quarter, when the the results are announced on March 28. The loss is attributed to "one-time higher cost for memory". How did ATI end up spending more money on memory at a time of collapsing DRAM prices?

The company says it will break even at the operating leel for Q2 at its cash reserves remain strong "as it continues to reduce inventory". Ominous phrase that.

ATI forecasts "modest growth" in Q3 and a move towards break-even after adjustments. The company expects stronger business towards the end of the calendar year on the back of new products and assuming that the PC market strengthens, of course.

Missing in the profit warning is how ATI is faring, so far as market share is concerned. Traditionally, the company has dominated orders from PC makers assembling mainstream PCs. But lately, Nvidia has muscled into this territory in a big way. ®

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ATI press release (PDF)

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