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ATI slashes Q3 sales forecast

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ATI has warned that its Q3 revenues will be around five per cent below the range it forecast when it published its Q2 figures on 24 March.

Back then, it said Q3 sales would lie between $560m and $600m. This week, it said the figure would be closer to $530m, 12 per cent below the top of that range.

That's still 7.8 per cent up on Q3 FY2004's total, $491.5m, but it marks a 12.8 per cent decline on Q2 FY2005's $608m sales. However, unit shipments will be up five per cent sequentially, it said.

ATI blamed the dip on growing demand for its lower-end products, which reduced gross margins to 29 per cent from around 34 per cent in the previous quarter.

The chip maker also pointed to "lower-than-anticipated yields on certain products due to operational issues in the packaging and test area of the manufacturing process". It's tempting to speculate that was the result of the fire last month at Advanced Semiconductor Engineering's Chungli chip packaging and testing plant, though ATI made no comment this week on the effect of the fire. ATI is an ASE customer. At the time of the blaze, however, Credit Suisse First Boston claimed the impact of the fire could be "material" as the blaze tightens an "already short" supply of flip-chip substrates.

"The combination of tight supply and a four- to six-week substrate cycle time could disrupt ATI's high-end shipments through at least June," CSFB said. And, indeed, ATI's Q3 has been characterised by a shift away from sales of high-end products.

On the positive side, ATI said its desktop chipset business "exceeded expectations" during the quarter by "growing dramatically". It said it expects Q4 FY2005 revenues to reach $600m.

ATI will publish its Q3 figures on 23 June. ®

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