While graphics chip maker ATI Technologies Inc. still posted a small Q3 loss, the results weren’t as bad as company officials previously anticipated. The company today reported its Q3 2001 earnings, for the period ending May 31, 2001.
ATI reported sales of US$255.9 million for its fiscal third quarter, more than 10 percent higher than the previous quarter. The company reported an adjusted net loss of $4.2 million for the same period — about $0.02 per common share — which was better than ATI’s management previously stated. ATI attributes the difference to higher sales and better gross margins than anticipated.
ATI’s balance sheet is improved, too — the company reports cash and cash equivalents of $156.9 million, more than $58 million more than the previous quarter. ATI also sought to reduce inventory levels this quarter, which are down more than $60 million to about $140 million. ATI also said that cash flow has improved significantly for the quarter.
ATI president and COO David Orton said that his company has made substantial progress this quarter, although he tacitly admits that they have a way to go.
“While we acknowledge that there is more work to be done, we remain confident that we are on the right track. We are also confident that our new business strategy will enhance revenue growth and profitability over the long term,” said Orton.
ATI announced last month a major change in its business strategy. Until recently, the company focused on developing its own graphics hardware and manufacturing its own graphics cards. In late May, ATI announced plans to sell its graphics chips and license its board and driver designs to other manufacturers, adopting a similar strategy to competitor Nvidia. ATI still plans to continue its lucrative OEM business.
Accordingly, ATI expects revenues to decline in the fourth quarter as it transitions to the new strategy. ATI expects gross margins to improve in the fourth quarter, however. ATI still hopes to break-even in Q4, with profitability expected in 2002. ATI admits its rosy forecast is somewhat dependent on an as-yet imaginary recovery in the slumping PC market, but the company also said by then it will also be receiving royalty revenues from Nintendo’s GameCube video game console, which uses an ATI-derived graphics subsystem. The GameCube will be sold in Japan and North America later this fall.
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