Got to love Mr. Ho always looking ahead, also states he is comfortable with 55 - 60% sales growth for 1999. Considering purchasing some more shares as it seems there is little doubt earnings to be reported on July 8th will be spectacular. Stock could easily rally to $28.00 as long as the market does not get to preoccupied with rising U.S. interest rates
Graphics chip leader ATI driving along new routes
Reuters, Friday, June 25, 1999 at 15:10
By Lydia Zajc
TORONTO, June 25 (Reuters) - ATI Technologies Inc. (TSE:ATY)
Chief Executive K.Y. Ho is steering his company down new
avenues, much like a player driving a virtual race car along
the unfamiliar roads in the video games powered by ATI's
market-leading graphic chips.
In recent years, most of the world's big computer makers
have turned to ATI (NASDAQ:ATYT) for components that create rich,
crisp pictures for games and other applications.
ATI had a whopping 30 percent of the total graphics chip
market in the first quarter of 1999, up from 11 percent in
1996, the company said.
It is growing so quickly it is putting up a four-story
building next to its head office in Thornhill north of
Toronto, to help consolidate its scattered workforce.
But even if ATI won all of its rivals' market share, its
expansion would be limited by the pace of the industry overall,
Ho noted. This is prompting him to take the company he
co-founded in different directions.
"Sooner or later, you eat up their market share. Where can
you grow?" Ho said in an interview with Reuters this week. "The
best you can do is (match the) industry growth rate."
"So you need to expand to different market segments," he
said, speaking over the rumble of construction equipment next
door.
One looming obstacle is an industry trend to put all of a
computer's functions on one processor, which will cut back on
the current sales of stand-alone chips and components that form
the bulk of ATI's business, said analyst Dean McCarron of
Mercury Research in Arizona.
This trend "ultimately reduces the size of the stand-alone
graphics market," McCarron said. However, "because ATI is
diversifying, it can mitigate circumstances."
Ho and his researchers are developing parts for the set-top
box, a device that sits on a television and allows it to be
used to watch TV shows, as a digital VCR, to browse the Web,
play computer games and other applications.
ATI's first achievement in this area was last year's
contract for components from U.S. digital cable systems firm
General Instrument Corp. (NYSE:GIC), worth $187 million over three
to five years.
Ho expects at least two more such contracts, but would not
say when. "We definitely have other deals," he said.
ATI is also banking on the increasing sophistication of
consumer products. Ho says that many consumers don't realize
that computer chips already inhabit their microwave ovens,
digital VCRs and more. Sooner or later, these products will
include a graphic interface such as a face on a microwave
screen that tells you how long to cook certain items.
At the same time, ATI continues to push ahead its core
business, with plans to persuade two more laptop computer
makers to buy its products.
ATI now has all 10 of the top desktop makers and eight of
the top 10 laptop makers sewn up as clients. The two holdouts,
Toshiba Corp. (TOKYO:6502) and International Business Machines
Corp. (NYSE:IBM), will use ATI components by year-end, he
predicts. "We want them to be our customers," Ho said. "I
absolutely won't give up."
Ho is "very comfortable" with analysts' forecasts of yearly
sales growth reaching 55-60 percent in 1999, well above
industry rates. Overall, the graphics chip market tracks the
personal computer industry, which is expected to grow about 16
percent this year, ATI said.
McCarron warned that in the past, graphics chip makers have
only been able to stay No. 1 for 24 months before being
displaced, and that the industry is now facing a big shift.
"Two years from now, it should be very clear where everybody
will be positioned."
Analyst Brian Antonen at Research Capital, who likes the
stock, said ATI will likely stay ahead of its rivals. "It's a
very competitive industry and yeah, it's consolidating, but
ATI's...probably the best positioned."
Another problem facing ATI is a lawsuit by rival Real 3D
Inc. of Orlando, Florida. Real 3D has charged that ATI
misappropriated its patents and improperly solicited its staff.
ATI has filed a countersuit.
Asked about it, Ho dismissed the importance of the case and
noted that job-hopping in the industry was common.
($1=$1.47 Canadian)
e-mail lydia.zajc@reuters.com))
Copyright 1999, Reuters News Service |
