PC slump hits ATI sales

Q4 update

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Weak sales in the PC market are having a knock-on effect on ATI. The graphics chipmaker now estimates that revenues for Q4, ended August 31, 2001, are expected to be in the range of US $235 million to US $240 million. Earnings will be flatter than a flat pancake - between 0 and 2 cents a share. In June, the company forecast Q4 earnings 5-7 cents a share.

ATI also points to weak market for notebooks, hitherto the one bright spot in the PC industry, and a segment in which it is particularly strong.

In July, arch-rival Nvidia also pumped out a profit warning.

ATI and Nvidia have grown like Topsy in recent years, knocking out some contenders, and gaining share from the seven or eight also-rans still left in the market. At the low-end, Intel is snapping at the discrete heels of ATI and Nvidia, but right now, the chip giant's integrated graphics offerings present little threat.

Both firms have branched out, flogging chips into retail, games devices, PDAs, set-top boxes and the like. And this will help maintain growth paths - up to a point. The core business will come from PCs from years to come. And, like Intel, say, ATI and Nvidia will find it very hard here to grow faster than a rapidly maturing market. Except by shaving a few points of share - Unilever, Procter & Gamble-style - from each other.

This is why, ATI is emphasizing that it expects better sales in the next quarter (its Q1, 2003), despite the continuing weakness in the market.

In a statement, David Orton, president and COO, says:
"We continue to gain momentum with design wins in all of our business segments and we believe this momentum will translate into market share gains. ATI has the strongest product line-up in its history, and is very well positioned to outperform the PC market in 2003."

The company cites the "broad acceptance of its new RADEON 9700, line as well as the shipments of its integrated graphics products line".

So, ATI forecasts sequential double-digit growth in the next quarter. Considering that this includes the great PC build-out in advance of Christmas, it would be problematic for the company, and its shareholders, if it achieved anything less. ®

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