ATI back in the black

Sequential sales surge fuels profitability

ATI returned to profitability during the three months to 30 November 2005, the first quarter of the graphics company's 2006 fiscal year.

Sales for the period totalled $591m, making Q1 FY2006 ATI's second-best quarter in the last three years - it reported record revenues of $613.9m this time last year, 3.9 per cent higher than the most recent quarter's total. Sales were up 26 per cent sequentially.

In the previous quarter, ATI lost $11.2m according to GAAP rules, $29m on a non-GAAP basis. This time the figures were, respectively, profit of $7.6m (three cents a share) and $26.8m (ten cents a share). A year ago, ATI reported a GAAP net income of $63.7m (25 cents a share), and $71.4m (28 cents a share) on a non-GAAP basis.

Gross margins rebounded to 28.7 per cent, well up on the previous quarter's nine per cent, the result of a big Q4 FY2005 inventory write-down.

For Q2 FY2006, ATI said it's expecting sales to rise 8-12 per cent, making roughly $638-662m, thanks to increasing chipset sales - a further effect of Intel's inability to produce enough of its own chipset products, we'd say. The downside of a greater proportion of chipset sales is a reduction in gross margin, ATI warned, although it's only a single percentage point decline.

ATI was keen to stress that its products extend beyond the PC market. It said it shipped 21m chips for handheld devices - roughly half the number it shipped in the whole of FY2005. It has also shipped to date a total of 10m chips for HD TVs, the company added. ®

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