Earns out this am -->ATI profit surges, revenues to beat Wall St view
Friday December 19, 8:23 am ET
(Adds analyst comment and detail. In U.S. dollars unless noted)
TORONTO, Dec 19 (Reuters) - ATI Technologies Inc. (Toronto:ATY.TO - News; NasdaqNM:ATYT - News), which makes graphic chips for computers, phones and computer games, reported sharply higher profits on Friday on a 40 percent rise in revenue, and it said sales in the current quarter would come in above Wall Street estimates.
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The Markham, Ontario-based based company, whose chips are used in products ranging from computers and mobile phones to Nintendo's GameCube, reported net income of $47.4 million, or 19 cents a share, in the quarter ended Nov. 30, up $7.3 million, or 4 cents a share, a year earlier.
ATI shares rose 50 cents to $15.20 in the United States before the bell.
"My initial reaction is fairly positive. The company reported at the high end of the revised range they gave in November, and guidance for the next quarter looks pretty good," said National Bank Financial analyst Deepak Chopra.
"The biggest area of focus is always gross margins, and this quarter they were very strong."
ATI said revenue jumped to $469.7 million from $335.4 million, on strong demand for desktop computers. The company's closely watched gross margins were 35.9 percent of revenue, up slightly from 35.6 in the fourth quarter.
Analysts surveyed by Reuters Research expected, on average, earnings per share of 18 cents, and revenues of $457 million, in line with forecasts the company provided last month.
ATI said it expects second-quarter revenues between $430 million and $470 million, above the average Wall Street estimate of $423.9 million. It expects gross margins, as a percentage of revenues, to be in the upper half of its target range of 32-35 percent.
ATI said operating expenses rose to $106.7 million from $79.9 million a year ago, partly due to the sharp rise in the Canadian dollar against the U.S. dollar as well as costs related to a new restricted share units plan.
ATI adopted the plan in October as part of a pledge to its shareholders to scale back on stock options and made a one-time cash payment to nonexecutive employees as part of the scheme.
At the end of the quarter, the company had $380 million in cash, including short term investments, up from $350.7 million a year ago.
ATI competes with Nvidia Corp. (NasdaqNM:NVDA - News) and Intel Corp. (NasdaqNM:INTC - News) to supply the world's computer graphics chips. Its stock has risen almost 200 percent since the start of the year.
But the company still has an overhanging, nonoperational issue to deal with. The Ontario Securities Commission, Canada's main market regulator, has set a hearing for February 2004 for insider trading allegations against ATI's founder and chief executive K.Y. Ho.
Chinese born Ho founded the company in 1985 and was named by Business Week magazine in 1998 as one of the world's top 25 executives. He and his wife have been accused of dealing ahead of an ATI profit warning in May 2000.
($1=$1.33 Canadian)
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