ATI’s Intel Chipset Sales Tumble Dramatically

ATI to Miss Quarter Sales by Up to $140 Million

by Anton Shilov
09/07/2006 | 02:36 AM

ATI Technologies, a leading developer of graphics technologies and core-logic solutions that is to be acquired by Advanced Micro Devices, said it would miss its revenue estimates by up to $140 million as a result of lower than expected sales of chipsets for processors by Intel Corp., the world’s largest chipmaker.

 

ATI Technologies expected revenues for the fourth quarter of fiscal 2006 to be between $620 million and $660 million. However, the company on Wednesday announced that consolidated revenue for the fourth quarter of fiscal 2006 is currently expected to be approximately $520 million.

The anticipated revenue shortfall is due primarily to lower sales volumes of integrated chipsets for Intel-based platforms, the company explained. In addition, handheld revenue was lower than expected, reflecting a supply chain adjustment by one of ATI’s major customers. “We believe this adjustment is temporary in nature and should not have a long-term impact on revenue,” the company said in a statement. Handheld and DTV businesses account for about 20% of ATI's revenue, which chipsets bring ATI roughly 26% of revenue, according to the compay's Q3 FY2006 results.

ATI Technologies is currently in process of acquisition by Advanced Micro Devices, who is competing fiercely with Intel Corp. in the market of x86 microprocessors. Some industry observers noted that Intel could pressure its partners among mainboard and computer makers to make them stop using Intel-compatible chipsets from ATI. According to an editor of TweakTown web-site, Intel has put pressure on mainboard makers so that they cancelled release of motherboards based on ATI’s next-generation Intel-compatible code-named RD600 chipset.

“While we anticipated a decline in future Intel-based chipset business following the announcement of the acquisition agreement with AMD, the decrease occurred much sooner than we expected,” said Dave Orton, chief executive of ATI Technologies. “Our other product lines are quite healthy and the response to our recent handheld, digital TV and GPU product announcements has been extremely positive from both customers and from the overall market”.