ATI: Disappointing Preliminary Third-Quarter Results

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Richthofen

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MARKHAM, Ontario--(BUSINESS WIRE)--June 6, 2005--ATI Technologies Inc. (TSX:ATY)(NASDAQ:ATYT) today announced that revenues for the third quarter of fiscal 2005 are expected to be about $530 million(1), approximately 5% below the low end of the revenue range provided on March 24, 2005. Gross margin is expected to be approximately 29%. Operating expenses, excluding the costs associated with stock-based compensation, are expected to be about $143 million.

Broad-based demand for our products led to unit growth of approximately 5% in our overall PC business despite the typical seasonal weakness seen in the third quarter relative to the second quarter. While we believe end-user demand remains stable, a product mix shift in the quarter towards the lower end of the desktop and notebook discrete market caused revenues to come in below expectations. Our desktop IGP business exceeded expectations, growing dramatically in the quarter. Revenues from our consumer business - which includes DTV and handset - were within expectations.

The product mix shift towards the lower end of the desktop and notebook discrete market contributed to a decline in gross margin for the quarter. In addition, gross margin was impacted by our desktop IGP products, which have margins that are well below the corporate average. Lower than anticipated yields on certain products due to operational issues in the packaging and test area of the manufacturing process, also negatively impacted gross margin.

Looking into the fourth quarter of fiscal 2005 and into fiscal 2006, we continue to see opportunities for growth. Based on our traction in the high growth markets of DTV and handset, our expanding footprint in desktop IGP, as well as continued strength in our core PC discrete market, we expect revenues for the fourth quarter of fiscal 2005 to be about $600 million.

ATI will report its fiscal 2005 third quarter financial and operating results on June 23, 2005. We will provide additional information, including a more detailed quarterly review and outlook, during our regularly scheduled conference call on that date.

Important Information Regarding Forward-looking Statements

Forward-looking statements look into the future and provide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include words such as "plans," "intends," "anticipates," "should," "estimates," "expects," "believes," "indicates," "targeting," "suggests" and similar expressions.

This news release contains forward-looking statements about ATI's objectives, strategies, financial condition and results. These "forward-looking" statements are based on current expectations and entail various risks and uncertainties. Our actual results may materially differ from our expectations if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate. Therefore we cannot provide any assurance that forward-looking statements will materialize. We assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason. Additional information concerning risks and uncertainties affecting our business and other factors that could cause our financial results to fluctuate is contained in our filings with Canadian and U.S. securities regulatory authorities, including our 2004 Annual Information Form and 2004 Annual Report filed on SEDAR at http://www.sedar.com.
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http://www.rage3d.com/index.php?cat=75#newsid33818037

Stock is down 5%.
Simple message is that ATI failed with R4xx. No way to deny that. Nvidia is enjoying growiing sales in the desktop and notebook GPU space as expected.
They offer the best and most feature rich products right now. Best seller definatly are 6800GT, 6600GT and 6200.

ATI described their lower sales with the following words.
The product mix shift towards the lower end of the desktop and notebook discrete market contributed to a decline in gross margin for the quarter.
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That might be the case for ATIs products but definatly not for the GPU market as a whole.
Nvidia is enjoying record margins because they sell huge quantities in all segments.
THeir margins are at record levels - around 40% while ATIs margins are down from 36 to 29% in the third quater.
They simply missed the boat with their whole R4xx line. Nvidia surpassed them in revenues, gross margins and in profits. ATI better get their act together with the next generation.
With the current they lost the battle. To many press editions and paper launches (X800XT-PE, X700XT), old tech and nothing new compared to R3xx, no SLI, no bridge chip until the beginning of this year (totally missed AGP). It simply was a matter of time until that failure became obvious in financial results too.
 
just today ATI lost over a doller per share 15 bucks and some change to 14.... thats a big hit.... good thing i sold my ati stocks before =)
 
hehe yeah....

but really i expected that and everyone who is not a blind f*nboy could have seen that comming. It simply was too obvious. They are playing catch up for a year now and still have big holes in their product line - for instance low end X300 vs 6200 and X700 vs 6600GT.
Biggest problem is the old tech. Nobody wants to invest a serious amount of money in old tech at this point. If i would pay 200$ or more i would make sure its a SM3.0 part.
 
ATI didn't plan on AGP sticking around so strongly, simple as that. They were fine in their PCIx lineup but their AGP lineup (up until now) had serious holes. The 9800 held its ground for a long time but has now been fully overan but the 6600GT. The x800 AGP vanilla has finally arrived but probably too late. Intel has gained on the low end against both companies with its integrated, so you will be seeing ATI pumping the Crossfire hard.
 
A few things, first its PCIe not PCIx.

Second, graphics companies do not make their money off of people like us who buy high end cards, or people who know what SM3.0 is. They make their money in the OEM market, where joe schmoe doesn't know or doesn't care what sm3.0 is.

Their revenue lost I would wager is more due to their supply problems then anything else. Because when it comes down to it, they dont lose large margins in the OEM market because their card gets 100 less 3dmark scores, or because they dont use a technology that will become needed 2 years from now.

Thirdly, this thread is bordering on flame bait, I know the original poster probably intended it to be informative, but posts like this always turn into flame wars. It wont be long until the nvidia monkeys come in here and start laughing at ATi, and then the ATi monkeys will bring up the FX line and then the thread will be gone.
 
I wish GPU companies would realize that the way to get ahead is to produce a 200$ card with next to top of the line performance like the 9800pro. Besides no-one took the R4XX series seriously anyway. It was just a stop-gap rehash of the R300. All ATI need is a good R520 base GPU for around 250$ Hardly anyone buys the Ultra high end XT PE cards. A company would be much better off loosing the Ultra High end battles that every one loves to watch, and winning the midrange battle.
 
There is lots of money to be made in the channel as well as OEM. The margins on the higher end cards are huge, of course. Otherwise ATI wouldn't have panicked and released bridged AGP solutions (which they initially scoffed at) for their X800 refresh. This obviously came too late and didn't stop the bleeding much, but was better than letting Nvidia have all the AGP market. There are no tier 1 OEMs making AGP systems and havent been for some time.
 
Ouch, 5 percent below low estimate thats gotta hurt...

Yes, ATi is heavily behind PCI-E. I think though, that Nvidia may not be doing that much better. Many people are holding off buying AGP for fear that it will be outdated, many are holding off buying PCI-E because they can't (no motherboard support/havent upgraded yet.)

I know plenty of geeks who are holding on to their existing cards for quite a bit longer than they normally would because of this transition phase.
 
Time until Rollo or Prime1 come in here and turn this into a flamewar

10..9...8...
 
Im sorry but you people are all insane.

These total revinue are BULK made by older cards. Talking AGP/PCI (not express).

Go look at graphs or sales charts. Biggest seller of 2005 in the UK? PCI form factor cards.
Best selling cards for ATI and Nvidia of that year? 5200 and 9600/9800.

If anyone even tries to do or make a comparison of blame of this on X800 line "failing" or 6800 line "success" , guess what, you're wrong. Its that simple. Have to go so thats all for now.

Want to argue me? Pull out the total sales charts for either company by brand and type. You'll be shocked to know that the mainstream graphic buyers dont update yearly or spend hundreds. Once again, the main profit for both companies is off of older cards.
 
ATI's biggest problem is the fact that they have way too many buns inthe over and they seem to forget to take them out....

R520, AMR, X200

Please.... FINISH ONE before going on to the next!
 
Impaqt said:
ATI's biggest problem is the fact that they have way too many buns inthe over and they seem to forget to take them out....

R520, AMR, X200

Please.... FINISH ONE before going on to the next!
Click to expand...

add Xbox360 and Nintendo Revolution chips
 
Erasmus354 said:
A few things, first its PCIe not PCIx.

Second, graphics companies do not make their money off of people like us who buy high end cards, or people who know what SM3.0 is. They make their money in the OEM market, where joe schmoe doesn't know or doesn't care what sm3.0 is.

Their revenue lost I would wager is more due to their supply problems then anything else. Because when it comes down to it, they dont lose large margins in the OEM market because their card gets 100 less 3dmark scores, or because they dont use a technology that will become needed 2 years from now.
Click to expand...

I tend to disagree with you. I mean supply problems?? Cmon. How long is ATI going to have supply problems. Really man - they converted their whole lineup on a smaller process and improved yields by doing so. Their parts contain fewer transistors than the ones from Nvidia. So definatly Nvidias GPUs have a bigger die size than ATIs.
How come that while ATI is loosing ground on the whole front, Nvidia is enjoying record margins. 40% in the current quater on GPUs. 590 Mio in revenue and 60 mio in profits. I mean those things you described seem to not hit Nvidia. Their business is growing while ATIs is declining.
So no one can tell me that the lower end and Intel is the problem.
The problem for ATI is R4xx and RV4xx as a whole.
For customers there is no reason in the vast majority of the deskop GPU market space at the moment to buy ATIs products. In most af the marketplace the competition offers more for the money and that is what is happening.
People prefer to buy Nvidias 6200, 6600GT or 6800GT.
While the X800XL is a great product it came to late and its not that attractive anymore because Nvidia and its partners adjusted their pricing. For the same or a littlebit more money the majority still would go with a GF6800GT because it likeley that you might enjoy it more in the comming future than the X800XL.

It definatly has nothing to do with the low end or Intel alone. The biggest problem for ATI is Nvidias NV4x lineup. SM3, good performance and reasonable prices in all market segments. That is something missing on the R4xx lineup.
They have fallen behind big time and it is likeley that this scenario will continue until ATI can replace der R4xx product line by R5xx product line - and with product line i mean not a high end R520 alone. That won't do much. They seriously need a complete new lineup.
 
Richthofen said:
Simple message is that ATI failed with R4xx. No way to deny that. Nvidia is enjoying growiing sales in the desktop and notebook GPU space as expected.
They offer the best and most feature rich products right now.
...
With the current they lost the battle. To many press editions and paper launches (X800XT-PE, X700XT), old tech and nothing new compared to R3xx, no SLI, no bridge chip until the beginning of this year (totally missed AGP). It simply was a matter of time until that failure became obvious in financial results too.
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Yup, Nvidia sure is feature rich. I LOVE that I can turn HDR on in Farcry at 1280 on my 6600GT and game away at rockin' frame rates. Oh wait, it's going to take $700 in video cards and a upgraded motherboard and PSU to do that. Honestly, kudos to Nvidia for bringing SM3.0 to market, but saying that Nvidia is then better and more futureproof is ridiculous (unless you buy a 6800GT or higher SLI setup). It's like me saying I buy ATI for the Ruby tech demo, because given the frame rates you get when you turn on those features, you aren't going to be playing the game.

X700XT was a fuckup, plain and simple. But there are many people out there with X800 XT PEs. Supply was low for a while, but cards were available.

Old tech? I think that the Nvidia fan boys haven't realized yet how regurgitating this argument actually hurts them. What does it say about Nvidia if ATI's old tech still beats Nvidia's cards in many games?

So back to SLI...and once again, useless unless you want to throw $800+ at your video card set up. How many people have done that? Take your victory I suppose, but know that there are very, very few people out there actually using it.
 
FanATIc said:
Im sorry but you people are all insane.

These total revinue are BULK made by older cards. Talking AGP/PCI (not express).

Go look at graphs or sales charts. Biggest seller of 2005 in the UK? PCI form factor cards.
Best selling cards for ATI and Nvidia of that year? 5200 and 9600/9800.

If anyone even tries to do or make a comparison of blame of this on X800 line "failing" or 6800 line "success" , guess what, you're wrong. Its that simple. Have to go so thats all for now.

Want to argue me? Pull out the total sales charts for either company by brand and type. You'll be shocked to know that the mainstream graphic buyers dont update yearly or spend hundreds. Once again, the main profit for both companies is off of older cards.
Click to expand...


its easy to argue against your statement.

1) ATIs lowest low end products are better than the ones from Nvidia. The FX5200 is no match against the 9600. So ATI still sells more here until the 6200 gets significantly below 50$

2) while low end is having a big volume its offering only very small gross margins.
In contrast to that on the high end side you have a smaller volume bit very huge margins.

So now if you wanna tell me that the low end is the problem i ask you why ATI is loosing revenue by 80Mio $ in only 3 months and in the same time their margins were down 7% in the same period from 36 to 29%. If low end would be the problem that either ATIs margins would be better or their revenue would be higher. If both are declining then they are selling not enough high end and mainstream products to offset the small lower end margins.

3) in the 4th quater 2004 Mercury Research stated that market share between Nvidia and ATI in the DX9 performance market was about a tie (50:50) with a very small advantage for Nvidia. Mercurys numbers include all products above the 6200 performance level. So obviously beginning with the 6600 and X700 up to the high end and SLI.
Only 3 months later Mercury released the numbers for Q1 2005 for the same market segment and the result was 70:30 for Nvidia.
The overall market share in the whole GPU space including IGPs did not change that much. Nvidia gained a littlebit and ATI lost a littlebit but no where near the numbers from the DX9 performance market.

So what definatly happened is that ATI still sold a lot in the low end including IGPs but faced a huge decline in the more pricy segments.
The numbers available clearly prove that. And what products ATI sells in those segments i am talking about - well everyone knows. Its R4xx and RV4xx.

Their financial results are really bad considering that they moved their whole line in the DX9 performance market except the X800pro to a smaller process(0.11) while Nvidia is still producing their high end parts above the 6600GT on 0.13 micron.

Some small numbers from the history.
Nvidias margings during GF4 were around 35%.
During GeforceFX they declined to almost 27% while ATI increased theirs to 35%.
Now with NV4x Nvidia set record levels at around 40% and ATI's declined to 29% in the current quater.

I think there is not much to say anymore. It's so obvious that they badly need a new lineup - it's not even funny.
 
Impaqt said:
ATI's biggest problem is the fact that they have way too many buns inthe over and they seem to forget to take them out....

R520, AMR, X200

Please.... FINISH ONE before going on to the next!
Click to expand...
I dunno about that... if they only have one product and it fails, they can kiss their revenue goodbye. The market has been really rough lately and unless someone here is a stock analyst here, that's about all there is to say (intelligently) here...

I'm just glad I picked up 100 shares of Nvidia a few weeks back... So far I've made a little money!
 
Stock values are also partially based on "investor speculation". Many may not know what the features actually mean, or how it really impacts in computing performance, but they do understand "brand x has this feature but we don't". This causes a downtick.

Annual revenue comes into play, but emotional impact exists as well in stock valuation. So unless investors feel that the playing field is level, one stock will increase and another will decrease due to sale/purchase of shares.
 
ATi cou;dnt deliver any kind of cardthis last generation until Nvidia sold everyone theirs and says that its because people bought low priced cards? Thats all they fucking had on the shelves!!!!!!
 
Zinn said:
I dunno about that... if they only have one product and it fails, they can kiss their revenue goodbye. The market has been really rough lately and unless someone here is a stock analyst here, that's about all there is to say (intelligently) here...

I'm just glad I picked up 100 shares of Nvidia a few weeks back... So far I've made a little money!
Click to expand...

you might enjoy them going forward.
Now here is the joke of the day
M$ has to pay Nvidia to enable backward compatibility on XboX360. So now Nvidia is making money on PS3 and xbox360.
http://biz.gamedaily.com/features.asp?article_id=9761&filter=

I remember the Nvidia CEO stating about 9 months ago that delivering backwards compatibility to xbox1 is a problem because M$ would have to pay Nvidia otherwise they would sue them. Now it seems that M$ is paying.
HAHA really :) can't believe that.
 
And so stock investors see that the ATI competition has money making potential on 6x00 series, SLI, RSX, G70 and now also Xbox 360. Even if not technically superior they'll emotionally feel the competition is doing better and this will have a negative impact on ATI's stock.

Kinda like how Airbus wins deminish Boeing stock and vice versa, just apply the result to the computer graphics sector.
 
Richthofen said:
its easy to argue against your statement.

1) ATIs lowest low end products are better than the ones from Nvidia. The FX5200 is no match against the 9600. So ATI still sells more here until the 6200 gets significantly below 50$

2) while low end is having a big volume its offering only very small gross margins.
In contrast to that on the high end side you have a smaller volume bit very huge margins.

So now if you wanna tell me that the low end is the problem i ask you why ATI is loosing revenue by 80Mio $ in only 3 months and in the same time their margins were down 7% in the same period from 36 to 29%. If low end would be the problem that either ATIs margins would be better or their revenue would be higher. If both are declining then they are selling not enough high end and mainstream products to offset the small lower end margins.

3) in the 4th quater 2004 Mercury Research stated that market share between Nvidia and ATI in the DX9 performance market was about a tie (50:50) with a very small advantage for Nvidia. Mercurys numbers include all products above the 6200 performance level. So obviously beginning with the 6600 and X700 up to the high end and SLI.
Only 3 months later Mercury released the numbers for Q1 2005 for the same market segment and the result was 70:30 for Nvidia.
The overall market share in the whole GPU space including IGPs did not change that much. Nvidia gained a littlebit and ATI lost a littlebit but no where near the numbers from the DX9 performance market.

So what definatly happened is that ATI still sold a lot in the low end including IGPs but faced a huge decline in the more pricy segments.
The numbers available clearly prove that. And what products ATI sells in those segments i am talking about - well everyone knows. Its R4xx and RV4xx.

Their financial results are really bad considering that they moved their whole line in the DX9 performance market except the X800pro to a smaller process(0.11) while Nvidia is still producing their high end parts above the 6600GT on 0.13 micron.

Some small numbers from the history.
Nvidias margings during GF4 were around 35%.
During GeforceFX they declined to almost 27% while ATI increased theirs to 35%.
Now with NV4x Nvidia set record levels at around 40% and ATI's declined to 29% in the current quater.

I think there is not much to say anymore. It's so obvious that they badly need a new lineup - it's not even funny.
Click to expand...


As far as ATI is concerned,

OEM > Card Sales

and once again, new boards do not create that much income. You're comments at the bottom of your initial post:

THeir margins are at record levels - around 40% while ATIs margins are down from 36 to 29% in the third quater.
They simply missed the boat with their whole R4xx line. Nvidia surpassed them in revenues, gross margins and in profits. ATI better get their act together with the next generation.
With the current they lost the battle. To many press editions and paper launches (X800XT-PE, X700XT), old tech and nothing new compared to R3xx, no SLI, no bridge chip until the beginning of this year (totally missed AGP). It simply was a matter of time until that failure became obvious in financial results too.
Click to expand...



are rather misleading as you are basing assumption that Nvidias gains are purely off their graphics cards. Do you know what Nforce is? Its a motherboard chipset and its holding a massive monopoly currently with the AMD + PCI Express area. I maybe incorrect but i believe the sales on the Nforce 4 alone are in the millions not including the Nforce 3 and 2 which still are very much alive.

This is a huge reason why Nvidia is gaining so much that you chose to either forget or ignore. Helloooo chipset area, large profit, monopoly. Its not the "godly Nvidia 6".
 
FanATIc said:
Im sorry but you people are all insane.

These total revinue are BULK made by older cards. Talking AGP/PCI (not express).

Go look at graphs or sales charts. Biggest seller of 2005 in the UK? PCI form factor cards.
Best selling cards for ATI and Nvidia of that year? 5200 and 9600/9800.

If anyone even tries to do or make a comparison of blame of this on X800 line "failing" or 6800 line "success" , guess what, you're wrong. Its that simple. Have to go so thats all for now.

Want to argue me? Pull out the total sales charts for either company by brand and type. You'll be shocked to know that the mainstream graphic buyers dont update yearly or spend hundreds. Once again, the main profit for both companies is off of older cards.
Click to expand...

Perhaps by PCI form factor they actually mean AGP...since AGP is part of the PCI spec...I find it very difficult to believe that PCI outsold AGP...that just doesn't make any sense since the biggest sales would be from OEMs and OEMs haven't used PCI vid cards since...oh...about 1997...
 
^eMpTy^ said:
Perhaps by PCI form factor they actually mean AGP...since AGP is part of the PCI spec...I find it very difficult to believe that PCI outsold AGP...that just doesn't make any sense since the biggest sales would be from OEMs and OEMs haven't used PCI vid cards since...oh...about 1997...
Click to expand...


It was a list that the inq had posted about 4 months ago, small article complete with a link for the best selling cards + card production costs of 2004.

In the UK PCI cards were the biggest seller
PCI support ends with the 5200FX and 9500 Pro (i believe)
In the US it was AGP (obviously) and it was middle end and low end cards dominating with high end taking up something like 4 percent COMBINED from both comapnies.
 
FanATIc said:
It was a list that the inq had posted about 4 months ago, small article complete with a link for the best selling cards + card production costs of 2004.

In the UK PCI cards were the biggest seller
PCI support ends with the 5200FX and 9500 Pro (i believe)
In the US it was AGP (obviously) and it was middle end and low end cards dominating with high end taking up something like 4 percent COMBINED from both comapnies.
Click to expand...

And we're sure the brits don't just have a different name for it?
 
HighTest said:
And so stock investors see that the ATI competition has money making potential on 6x00 series, SLI, RSX, G70 and now also Xbox 360. Even if not technically superior they'll emotionally feel the competition is doing better and this will have a negative impact on ATI's stock.

Kinda like how Airbus wins deminish Boeing stock and vice versa, just apply the result to the computer graphics sector.
Click to expand...

XBOX360 = ATi

RSX = nonexistant hardware, so you cant really say anything about it. And by nonexistant I mean that it is still being designed, G70, R500, R520 have all been taped out and finished ready for production.
 
Zinn said:
I dunno about that... if they only have one product and it fails, they can kiss their revenue goodbye. The market has been really rough lately and unless someone here is a stock analyst here, that's about all there is to say (intelligently) here...

I'm just glad I picked up 100 shares of Nvidia a few weeks back... So far I've made a little money!
Click to expand...

Um... What makes a company more money...

Scenario A: Develope a product, Bring it to market, Sell it. Begin Next project
OR
Scenario B: Develope product idea 1, THen Develope product idea 2, then develope product idea 3, Release product one but realize its incredibly flawed and start over, Continue working on Product 2, Put Project 3 onthe back-burner to take on addition Projects for Microsoft and Nintendo.... Blah blah blah............


THis is the first time in their history that they have so many things going on at once. THey are failing misrebly.

Scenario B is what bankrupts companies. Not Releasing product that works.
 
Another winner troll bait flame topic from a small minded individual. Nice. I bet the topic starter is that banned ATI hater Ricko.
 
Erasmus354 said:
Thirdly, this thread is bordering on flame bait, I know the original poster probably intended it to be informative, but posts like this always turn into flame wars. It wont be long until the nvidia monkeys come in here and start laughing at ATi, and then the ATi monkeys will bring up the FX line and then the thread will be gone.
Click to expand...

Hate_Bot said:
Time until Rollo or Prime1 come in here and turn this into a flamewar

10..9...8...
Click to expand...

For christ's sake. And posting that shit is any better? You're the ones who are starting shit. Just stop it.
 
Impaqt said:
Um... What makes a company more money...

Scenario A: Develope a product, Bring it to market, Sell it. Begin Next project
OR
Scenario B: Develope product idea 1, THen Develope product idea 2, then develope product idea 3, Release product one but realize its incredibly flawed and start over, Continue working on Product 2, Put Project 3 onthe back-burner to take on addition Projects for Microsoft and Nintendo.... Blah blah blah............
Click to expand...

I love the way you think, if every company thought in the same lines as you there would only be 1 person companys still working in there home garage.

You have to expand to be able to compete, if you dont have the manpower to do it you get it.
 
FanATIc said:
are rather misleading as you are basing assumption that Nvidias gains are purely off their graphics cards. Do you know what Nforce is? Its a motherboard chipset and its holding a massive monopoly currently with the AMD + PCI Express area. I maybe incorrect but i believe the sales on the Nforce 4 alone are in the millions not including the Nforce 3 and 2 which still are very much alive.

This is a huge reason why Nvidia is gaining so much that you chose to either forget or ignore. Helloooo chipset area, large profit, monopoly. Its not the "godly Nvidia 6".
Click to expand...

It's funny how zealots seem to forget there are other money generators for Nvidia well beyond their graphic chips. Seriously, looking at earnings means squat considering that simple fact.OEMs sales have always overshadowed and surpassed anything the private purchase count has even touched. Trying to use EITHER ATI or Nvidia stock numbers to support which cards are better is trully pointless. Stick to the cards gents...stick to the cards....both companies make products that can speak for themselves.
 
someone else can make a new thread about this, if desired. Better idea to have it in the ATI section though.
 
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