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Hercules waves the ATI flag

Guillemot loses interest in Nvidia?

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Hercules, the graphic retail board sub of Guillemot, is to mainline on ATI chips for high-end products. It has won exclusive European retail and distribution channel rights to ATI's latest ALL-In-Wonder products.

Which beggars the question: what does this mean for Guillemot's relationship with Nvidia, the supplier of graphics chips to Hercules' current high-end offerings and ATI's arch-rival.

At the very least, it is a warning shot from a major customer across Nvidia's bows. Today's deal with ATI marks a "strategic shift for Hercules to meet the expectations of both the digital generation and the most demanding gamers," Claude Guillemot, President of Hercules Technologies, says in a statement.

He reckons that ATI delivers "the most advanced technology for both 3D gaming and digital PCTV applications".

Products featuring this technology will be branded under the Hercules Prophet range and are due to ship next month.

The deal marks another step forward in the performance retail channel for ATI. Historically, the Canadian graphics chipmaker's strengths lie in the PC OEM market. But with PC manufacturing suffering, and Nvidia winning market share in this sector, ATI is feeling some pain too.

This week, ATI announced Q1, 2002 sale (warning PDF) were down nearly 27 per cent on the same period last year. Some of this is technical - the company is shifting its system integrator business from supplying complete boards to supplying chips only. This means higher margins, but lower top-linerevenues. ATI says its suffered from the slowdown in PC sales but has not published an estimated cost to its business.

ATI's Q1 results were, all things considered, rather good, with higher margins from a better product mix, and more cash generated on the back of improved inventory management. The company expresses optimism for performance in Q2. ®

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