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. ®