DTV, Handheld Sales Drive Stronger Q3 Sales at ATI
Strong results in ATI Technologies’ chipset, DTV and handheld segments helped it overcome a “challenging quarter for the PC industry” in Q3 ended May 31, CEO David Orton said Thurs. He commented as the graphics chip maker reported Q3 sales of $652.29 million, up from $530.24 million a year ago. The company posted a $31.9 million profit (12 cents per diluted share), reversing last year’s $445,000 loss (0 cents).
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HDTV sets containing ATI’s Xilleon chips “continue to dominate image quality tests and product reviews,” Orton told analysts in a conference call, offering as an example a positive review given a Sony Bravia HD set. ATI CFO Patrick Crowley later said DTV “had a fantastic quarter” for the company as revenue in units grew more than 50% from Q2. But he didn’t offer a comparison with Q3 2005. Crowley said ATI is “seeing especially strong demand for the Xilleon 240… and continued to land broad-based new design wins including wins with 9 of the top 11 LCD TV OEMs” but he didn’t identify the companies.
Combined DTV and handheld sales accounted for more than 20% of ATI revenue in the quarter, Crowley said. Royalties from ATI’s videogame console business, meanwhile, were about $10 million in the quarter, he said. The company gets revenue from Microsoft and Nintendo for chips in their consoles. An ATI chip, part of current Xbox 360 and Nintendo GameCube consoles, will be featured in Nintendo’s upcoming Wii console as well.
ATI continues to “focus on building design win momentum to accelerate the growth in our consumer business,” Orton said. On that front, he said, “demand for LCD DTVs in very strong, particularly in Europe right now, and we expect Xilleon to set a new revenue and unit shipment record in Q4.” He told analysts ATI’s next-generation Xilleon “is ramping with designs hitting the shelves this fall.” The new Xilleon chip “will redefine image quality benchmarks and deliver features reserved in the past for separate, specialized chips,” he said: “Image quality is such a critical criteria now for digital TVs that OEMs are now asking to use the ATI logo on upcoming designs as a competitive differentiator.”
“With several important PC and graphics processor advances on the way, we see a number of catalysts that will drive excitement and growth for ATI and the industry,” Orton said. He cited the company’s recent acquisition of Helsinki- based mobile graphics company Bitboys Oy and a new strategic partnership with Nokia in which ATI and the cellphone giant are working with developers to drive content through a support network of ATI-dedicated tools and software development kits.
ATI predicts sales of $620-$660 million for Q4, “given anticipated near-term PC market conditions,” with gross margin improving to 31-31.5% of sales, up from 30.1% in Q3, it said. The company reported sales of $470 million in Q4 2005.
Despite the positives, ATI shares fell after the results came out and were down 11.16% at $13.77 in late afternoon trading Thurs.