ATI Reports First Fiscal Quarter Results

by Anton Shilov
12/18/2002 | 05:02 PM

ATI Technologies today reported its financial results for the first quarter of its 2003 fiscal year ended November 30, 2002. The quarter was pretty successful for ATI because they rolled-out two new graphics products, the RADEON 9000 PRO and the RADEON 9700 PRO, while the demand began to rise in September and has been relatively high since then. As we reported not so long ago, ATI currently even cannot fulfil all the orders they have on the R300-based graphics cards, such as RADEON 9500 and 9700 series (see this news-story).

Revenues for the first quarter were $322.0 million, up 34.5% from $239.5 million in the fourth quarter of fiscal 2002, and up 28.8% from $250.0 million in the first quarter of fiscal 2002. Gross margins were 27.3%, down from 30.1% in the fourth quarter of fiscal 2002. Operating expenses, excluding amortization of intangible assets, increased to $79.6 million from $70.1 million in the previous quarter. Net income for the first quarter was $5.0 million or $0.02 per share compared to a net loss of $32.2 million or $0.14 per share for the fourth quarter of 2002 and a net loss of $10.3 million or $0.04 per share for the same period a year ago. Adjusted net income for the quarter was $7.0 million or $0.03 per share compared to $2.4 million or $0.01 per share for the previous quarter, and $10.4 million or $0.04 per share for the same period a year ago. <%BANNER[article]%>

Let us briefly glance at ATI's operational highlights during the quarter:

• During the first quarter, ATI enjoyed rapid adoption of the RADEON 9700 and RADEON 9000 family of products by the OEM, system builder and retail channels. The RADEON 9700 and RADEON 9700 PRO began shipping in the flagship models of the major OEMs worldwide including Dell, HP and Apple.
• ATI continued to maintain a strong position in the notebook market during the quarter with more than 20 design wins for the Mobility RADEON 9000. Major design wins included models from Dell, HP and Apple.
• ATI set a new standard for the performance mainstream desktop market with the introduction of the RADEON 9500 and RADEON 9500 PRO.
• ATI's FIRE GL X1 workstation graphics card, based on the RADEON 9700 visual processing unit, began shipping into Dell's high-end workstation, the Precision 650.
• ATI had a rather successful ramp of its integrated graphics chip products in the value segment of the PC market with the RADEON IGP 320M and IGP 340M.
• ATI broadened its reach into Asia-Pacific with design wins with Legend and Founder - the top computer manufacturers in China.

As for the future, ATI does not seem to build castles in the sky. They say that because of the seasonal strength in the first quarter, ATI believes that revenues in the second quarter will be approximately 10% lower than the first quarter. During the second quarter, gross margins as a per cent of revenues should improve somewhat, while total operating expenses are expected to increase primarily due to research and development costs related to higher prototyping expenses. Based on these factors, the Company is targeting to achieve second quarter adjusted net income that is approximately the same as the first quarter. Although the company believes that gross margins should improve somewhat in the second quarter, it currently does not expect to approach margins in its target range of 32 - 35% until the fourth quarter of fiscal 2003.

To sum up, keeping in mind the current market conditions, ATI Technologies was quite successful in its first fiscal quarter. They managed to launch a very strong line of products and do their best to unveil even better VPUs next year in order to compete with the forthcoming GeForce FX and its derivatives.