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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: j g cordes who wrote (38998)	3/17/2003 3:34:40 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 71318

ATI Technologies More to the Story Than 3D Chips Nasdaq: ATYT $4.16 (as of 03/06/03 ) P/E 21.9 PSR 0.9 ROE n/a BETA 2.45 Debt/Eq. 0.04 Our "Five Benchmarks" tutorial explains these numbers March 7, 2003 - ATI Technologies (Nasdaq:ATYT) makes 3D graphics processors used primarily in game consoles, workstations, PCs, and set-top boxes. This company is considered the high-end graphics leader and recently it's finding success in pushing into the mainstream market. The stock has been shrouded by the dark uncertainties of legal and regulatory issues, always a daunting concern for investors, nevertheless its remarkable success in the exciting business of 3D graphics makes this a rather intriguing company to know. Before zooming in on the impressive success stories that are piling up in the company's Press Release bin lately, investors might start with a big-picture view. This company just settled a class action lawsuit relating to misleading investors prior to an earnings warning in 2000. The settlement amount was relatively small--$8 million--and ATI admitted to no wrongdoing, but the circumstances surrounding this suit build a challenging hurdle of investor distrust that will need to be cleared for the stock to return to favor. Moreover, regulatory authorities are still probing company management regarding insider trading allegations. ATI is also doing business in an intensely competitive field that is prone to fickle swings in leadership. Nvidia (Nasdaq:NVDA) is ATI's primary rival. Nvidia has dominated the mainstream market, with important footholds like the Microsoft X-Box gaming console. ATI is widely considered the leader in the high-end processor market, but they are finding ways to bring down costs or raise performance on mainstream chips to score major design wins over Nvidia. On Thursday, ATI reported 11 new design wins with Dell, IBM, Fujitsu, Sony, NEC, ACER, and Voodoo. On Tuesday ATI announced a technology development deal with Nintendo, presumably solidifying its position as the supplier of graphics processors for the Nintendo GameCube console. Last Friday an industry analyst at Friedman Billings Ramsey reported that ATI beat out Nvidia for a large design win with Micro-Star, which until now had been an exclusive Nvidia customer, and that "other Nvidia designs at Micro-Star are at risk." ATI's apparently successful efforts to muscle into the mainstream segment of the graphics chip market is coming at the expense of Nvidia, the leader in that segment. Both stocks have plunged in recent years for various reasons, but the competitive nature of this business and short cycles for new designs make for a opportunistic, high-risk atmosphere. ATI's stock sells for just a bit more than $4 currently and hasn't benefited much from recent news of design wins and head-to-head turf victories. Of the 22 analysts that cover ATI, 12 have a Hold rating on it and 2 more label it with an outright Sell rating. This is an out-of-favor stock with a great deal of distance to cover in terms of restoring credibility with investors. As for its business, ATI is profitable and the numbers look pretty good, especially for a chip company these days. ATI is expected to earn $0.15 per share this fiscal year ending in August on revenues of $1.2 billion, with EPS of $0.30 next year. With a market cap of just under $1 billion, It's trading at a discount to sales. It has $200 million in cash and almost no debt. If you had to fit ATI's story into a fortune cookie it would probably read something like: Business is good but investors are distrustful, see which changes first. - James Hale aol.theonlineinvestor.com