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Technology Stocks : ATI Technologies in 1997 (T.ATY) -- Ignore unavailable to you. Want to Upgrade?

To: Edward W. Richmond who wrote (5576)	5/29/2000 8:13:00 PM
From: Garth Richmond	Respond to of 5927

I read an article recently that claimed that NVidia has been hit less hard because it is dominant in the high end cards, which are not a much a commodity product (yet). The article had a good point in theory, but I think they missed the point completely when applying it. The implied that ATI was suffering because it was in the commodity business and therefore vulnerable. Anyone who has done their homework knows that ATI continues to diversify into new markets, the mobile market being a recent one, and set top boxes, DVD, etc. at present. They are also encroaching on the high end PC market now, whereas they were once not even a participant there. I believe there is still a great deal of non-commodity business cycle left in the graphics markets, and ATI is executing very wisely. Having said that, I think NVidia will be less hard hit by the dumping particularly. The dumping manufacturers are mainly exiting the middle tier graphics market, hitting ATI hardest. However, the flip side of this is that when the dumping is over, ATI will been the main beneficiary, owning an even larger share of their "bread and butter" market. Michael Murphy has a valuation method he uses sometimes called "growth flow". The basic idea is that you should not punish companies for investing in R&D, so he calculates a "P/E"-like ratio, but uses "earnings plus R&D expenditures" instead of just earnings. ATI invests heavily in R&D, (more that all of their competitors combined, in fact, as I recall). I am inclined to believe ATI's statements of explanation, even though they seem odd. ATI has been very conservative and honest in the past, and I will give them the benefit of the doubt. I suspect hindsight will show this period as a good buying opportunity. Garth.