ATI takes chip wars to TV, Net
devices
By Brooke Crothers
Staff Writer, CNET News.com
July 8, 1999, 11:25 a.m. PT
Buoyed by another strong quarter in sales, graphics chip leader ATI
Technologies is preparing to expand into the market for low-cost
computing devices with "system-on-a-chip" products for next year.
As with S3, Broadcom, and Intel, ATI is trying to use its core product--in this
case, graphics chips--as a hub for developing entire systems for low-cost Net
devices and TV set-top boxes.
=====================================
So now S3 is getting into Set-top boxes, why not tell us exacltly what are the specification of their product, and if it isn't ready yet, well they must be 2 years behind ATI.
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The burgeoning area is a huge opportunity fraught with equally gigantic
risks. Nonetheless, ATI is at least going in with a decent track record and
strong sales, which could make it a formidable contender in a wide-open
field.
============================================
Risk for who, ATI already have contract with GI, and 2 others not yet disclose companies, and more OEM wins for the set-top wonder, Broadcom is trading at a PE of 283 so don't see too much risk here.
=================================================
ATI today reported sales of $302 million for the third quarter, up 65 percent
from $182.8 million posted in the like period last year. Earnings, excluding
acquisition and other costs, rose to $35.9 million, or 17 cents a share, vs.
$26.5 million, or 12 cents a share, for the corresponding quarter of 1998.
Including one-time charges, earnings came to $18.6 million, or 9 cents per
share.
While nearly all of ATI's revenue comes from graphics, the company is
beginning to diversify its products. ATI is preparing for dramatic changes in
the computer market revolving around low-cost consumer devices, chief
executive Kwok Yuen Ho said in an interview with CNET News.com.
To meet the demands of this market, next year the company is planning to
bring a single chip that combines the main processor with a graphics
processor, memory, and chipset, he said. This would position ATI as a
supplier of most of the critical electronic components in consumer
appliances, akin to Intel's role in the PC business.
"This market will be a lot bigger than people expect," Ho said. "Computing
devices will become much different. They will become so cheap that
people will have several devices." ATI has already tested the waters in this
market by supplying chips for General Instrument's advanced DCT-5000 TV
set-top box. That contract is worth close to $190 million.
Ho would not say where it will get the technology for the main processor in
the system-on-a-chip it plans for next year. The company has an integrated
chip design for the General Instrument box that uses a MIPS processor.
Technology hurdles
But analysts say forays into this market by others indicate that it is no easy
task to make money. The devices themselves will sell for low prices, and so
too will their chips. Integrated chips, moreover, come with their own
development and design complications.
===============================================
Then why the fu(* are all others in the market trading at PE of 50-70 if it's hard to make money, or does he mean it's going to be hard only for ATI, just tell us now so we all get out and forget about it.
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As with a lot of technology, they often look best on paper.
"It would be remarkable if ATI can work around the standard problems with
such chips," said Peter Glaskowsky, an analyst at Microprocessor Report. He
said a system on a chip takes "longer to design because of
interdependencies among the elements [and] that they cost more to
make...and become obsolete more quickly because of the difficulty of
updating each element as new technology becomes available."
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So having 5 times more employe that any other competitors it not an advantage ??
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Ho also said that they are preparing integrated chips for the PC market.
Chromatic Research, which ATI purchased in November of last year,
specializes in system-on-a-chip technologies.
All of this is being driven by the need to adjust to a new computing world
that emphasizes price over performance.
"We have to reduce costs," Ho said, adding that ATI sells a lot of its chips to
low-cost PC makers. He also pointed to increased sales in the notebook PC
market, where ATI is ranked third behind NeoMagic and Intel: "We intend to
be No. 1 next year."
But rival S3, which fell on hard times last year and lost its No. 1 standing in
the desktop market to ATI, is racking up a number of contracts to supply its
new Savage4 graphics chip to PC makers, including such leaders as
Compaq Computer and IBM. S3 is also working on an integrated
chip with Via for release this year.
================================================
What last year
S3 sales
1995 316M
1996 465M
1997 436M
1998 224M
Last 12 months 186M
What last year???? sales have been down since 96.
===================================================
Strong competition
"There are no guarantees in this business...S3's Savage4 is
matching or beating ATI on value, Nvidia's TNT2 is the fastest chip
on the market, and the laptop market is still wide open. I don't think
ATI or any other company can win so many fights at once,"
Glaskowsky said.
============================
So, what's the point here, confusion or what
==============================
ATI cited new customer victories of its own for its new Rage 128
chip for desktops. In addition to Apple Computer, the chip is used
in Gateway business desktops, a Hewlett-Packard Pavilion
consumer PC model, and Acer computers.
"ATI has done a great job over the last few years. It has good 3D
technology, good software, and good relationships with [customers.]
ATI is the strongest overall company in the 3D market, and it is
likely to maintain this position for the next year," Glaskowsky said.
In other financial highlights, ATI said gross margins were 37
percent for the third quarter, compared with 36.9 percent in the like
period last year.
Operating costs in the third quarter increased 96 percent year over
year to $63.5 million, up from $32.3 million for the third quarter of
fiscal 1998. This was largely attributable to the expected increase
in R&D expenditures relating to the acquisition of the Chromatic
development team and increased costs related to developing
additional product lines. |
