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ATI posts Q3 loss

Revenues down as demand shifts away from high-end chips

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ATI slipped into the red during the three months to 31 May 2005, a "challenging" third fiscal quarter, the graphics chip maker revealed today.

Revenue for the period totalled $530m, up eight per cent on the year-ago quarter, but 12 per cent down on ATIs original forecast for the quarter. When it announced its Q2 figures, it said Q3's sales would fall between $560m and $600m, though it revised the guidance to $530m earlier this month.

Gross margins fell to 29.1 per cent from Q2's 34.2 per cent and Q3 FY2004's 35.3 per cent. "Lower than anticipated yields on certain products due to an accelerated production schedule also negatively impacted gross margin," ATI said.

Its PC business accounted for $461m (87 per cent of revenues), up six per cent year on year. Unit shipments were up 22 per cent, suggesting a shift toward lower priced products. ATI's Consumer business accounted for approximately $70m (13 per cent of revenues), up 20 per cent on the year-ago quarter.

ATI lost $400,000 (zero cents a share) compared to a net income of $48.6m (19 cents a share) in Q3 FY2004 and $57.2m in Q2 FY2005. Had it not made stock-based compensation costs, the company would have posted a net income of $8.5m (three cents a share) for the quarter, compared to the $50.5m (20 cents a share) figure for Q3 FY2004.

ATI expects Q4 sales to hit $550-580m, up 3.8-9.4 per cent on Q3's total, but nonetheless down on the guidance the company offered earlier this month. Then, it said it was anticipating Q4 sales of $600m. The company blamed the downward revision on "a more conservative expectation of the ramp of new products in the fourth quarter".

ATI is expected to announce its R520 chip on 26 July, almost two months into the three-month period. Unless demand for the part is unprecedented, this will not contribute significantly to ATI's Q4 sales. Arch-rival Nvidia yesterday launched and began shipping its own new high-end part, the GeForce 7800 GTX.

Gross margins are expected to fall between 29 per cent and 30 per cent, ATI said - essentially unchanged, in other words. ®

Related stories

Nvidia unveils GeForce 7800 GTX
ATI quietly launches Radeon X550

ATI GPU to be first X part
ATI to launch R520 '26 July'
ATI slashes Q3 sales forecast

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