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Tuesday, August 30, 2005
ATI Fiscal Q4 to Disappoint

ATI Technologies Inc.'s bad summer got even worse yesterday as the company warned that revenue this quarter will fall about $100-million (U.S.) short of its previous forecasts.

It's the second time in two months the company has slashed expectations.

The graphics chip maker now expects revenue for the fiscal fourth quarter to be in the range of $465- to $480-million, compared with the forecast range of $550- to $580-million provided by the company in June. That initial forecast was itself a revision from $600-million, predicted earlier in June.

"We have to get better at predicting our business," ATI president and CEO Dave Orton said in a conference call yesterday.

Perhaps in recognition of the company's volatile bottom line, ATI executives refused to answer many quantitative questions posed by analysts during the call, repeatedly saying the fourth quarter isn't over yet, and that they'd provide more information during the fourth-quarter conference call on Oct. 6.

Gross margin percentage for the quarter is expected to be "in the single-digit range," ATI said. That estimate includes an inventory writedown which will see the company write down about $60- to $70-million worth of products.

The reduced figures are a result of weak sales in ATI's desktop product line, the company said.

The line missed company targets in terms of units sold and average selling price, ATI said.

All other product lines are expected to be in line with company expectations for both revenue and gross margin, ATI said.

ATI faces two major problems. The company has too much product in its inventories, and a lot of that product isn't selling at a high enough price.

However Mr. Orton said he feels the company's recent woes are short-term problems. He said there are no layoffs planned in the near future.

ATI is banking on a coming line of products to boost business, including the R520-based graphic chip. ATI's main competitor, Nvidia Corp., has made large strides in the high-end market recently partially because ATI didn't get to the market with new products fast enough. The company hopes to make up for that sluggish start this fall.

ATI is keeping tight-lipped about the chip's launch date, however. Company executives only said the chip should hit the market "very early" in the fall season.

The company is also banking on royalties from two new gaming systems for which it designed chips. Microsoft's Xbox 360 is due out before Christmas, while Nintendo's system, code-named Revolution, is due out some time next year.

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