Bitten by a growing industrywide shortage of key electronic components, ATI Technologies Inc. today said it will report a loss on lower-than-expected revenue for its fiscal quarter ending May 31.
The company, a leading maker of graphics chips and boards based in Thornhill, Ontario, blamed the poor results on a slowdown triggered by the inability of customers in the system integration channel to secure components. ATI also said large-scale consolidation within the graphics IC and board market has left companies with excess inventories to manage, which has eroded prices.
ATI said it expects to report revenue of $300 million for its third quarter, down a percentage point from a year ago, while gross margins should decline sequentially to 21% from 33.2% in the second quarter.
A loss of 6 to 7 cents per share is expected before adjustments for the amortization of acquired in-process R&D, other intangible costs, and a one-time inventory write-down of approximately $56 million. Analysts has projected the company would post earnings in the third quarter of 13 to 14 cents per share.
In a statement today, ATI said a severe shortage of components used in the PC industry, including processors, capacitors, and DVD-ROMs, was responsible for the negative outlook.
"This caused particular hardships to system builders as component suppliers preferentially allocated parts to their top-tier accounts," the company said.
Moreover, aggressive pricing tactics in the industry caused graphics board makers to clear out inventory, forcing ATI to move its RAGE 128 Pro to the mainstream segment faster than it had expected.
ATI chairman and chief executive, K.Y. Ho, said new strategies are already in place to help lead the company in a recovery in its fourth fiscal quarter. Specifically, initial production shipments of ATI's Radeon graphics chip in July should help the company's fourth quarter revenue and margins improve sequentially.
"While a number of forces have led to a disappointing third quarter performance, we believe the strength of our diversified strategy will prevail over the ong term," Ho said.