To: Canuck Dave who wrote (3023 ) 4/7/1999 4:51:00 PM From: Marc Read Replies (1) | Respond to
ATI Tech Stk Up On Anticipation Of Strong 2Q Results By Scott Adams The First Call mean earnings estimate from three analysts for the second quarter is 16 U.S. cents a diluted share, adjusted to exclude amortization for purchased in-process research and development. Although analysts expect the company to beat that number, they say the margin likely won't be as large as in the first quarter. "I think their gross margins will hold and (the quarter) was strong in terms of PC shipments, " Litva said. "I would expect they would exceed," he said, noting that his official forecast is for net income of 15 U.S. cents a diluted share. Bruce Krugel, analyst at Kearns Capital Ltd., also believes ATI can exceed expectations. "I suspect that will probably come in around 18 or 19 (cents)," he said, though his official estimate is 16 cents. For instance, Merrill Lynch Canada analyst Thomas Astle issued a note in February saying ATI was well positioned for any pricing war. "S3 used to be the market leader in graphics chips but lost this position to ATI last year, " Astle wrote. "However, under new management, S3 has introduced a new product called 'Savage4' that is aimed at the same market as ATI's Rage 128 and appears to be prepared to discount their product heavily to regain some of its lost share.... We continue to expect ATI to gain overall market share but there is some risk that this market share could come from lower profile OEM accounts in Europe and elsewhere while S3 or others win some higher-profile business with U.S. OEMs." Krugel said S3's price cuts have been more talk than substance so far. While S3 might steal some business from ATI, he still expects ATI to increase its market share. Antonen believes S3's chips don't perform as well as ATI's or other competitors' products, so he isn't expecting S3 to gain market share this year. Another reason investors have felt uncertain about ATI is a potential threat from Intel Corp. (INTC). Intel entered the graphics processor market last year with its i740 chips, but the chip was late to market and performed poorly, analysts said. Intel was supposed to come market this year with a new graphics chip called "Whitney," which is supposed to integrate graphics with core logic. But the chip has been pushed back from summer to fall. There are four separate parts to a computer: graphics, memory, logic Antonen believes that the Whitney isn't a threat to ATI because ATI and other companies are coming out with their own integrated graphics chips, which will still perform better than Intel's products. That means the newest graphics If ATI is able to post positive results, it could leave short sellers in a corner. As of March 15, the ATI short position on Nasdaq was 6.5 million shares, up from 3.8 million shares on Feb. 15.
