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

To: SBHX who wrote (3349)	5/5/1999 9:38:00 AM
From: Stocker	Respond to of 5927

ATI in today's National Post..... ATI still one step ahead of the pack Ian Karleff Financial Post Internet sites are fighting for eyeballs, and the better the graphic content, the greater the chance of victory. The companies that design the technology behind the awe-inspiring images on personal computer screens are in a war of their own for market share, a war a Canadian player is winning. ATI Technologies Inc. designs the chips and boards that propel the graphics capabilities of personal computers. Its technology has wreaked havoc on the leadership role of nearest competitor S3 Inc. (SIII/NASDAQ), but in the world of technology, today's leaders can easily become tomorrow's losers. It is an industry where charges of patent infringement are common. Yesterday, ATI won a judgment that it did not infringe on a patent held by Cirrus Logic Inc. Last summer, S3 tried to claim that another competitor, Nvidia Corp. (NVDA/NASDAQ), had infringed on one of its patents. Skirmishes aside, analysts do not seem too concerned about ATI's ability to maintain its lead in a marketplace that has seen the number of competitors dwindle to a third of their number five years ago, a market where Intel Corp. -- whose $209-billion market cap (all figures in U.S. dollars) is larger than all U.S. semiconductor firms combined -- is somewhat active and always a threat. "What always needs to be considered is what Intel's intentions are in the desktop graphics market ... this continues to be a competitive threat or consideration," says Susan Streeter, an analyst at Sprott Securities Inc. At the end of 1998, ATI held 31% of the graphics chip market, whereas S3 was estimated to have 20%, and Intel 9%. This was up considerably from ATI's 22% share in 1997. What could be troublesome is the fact that S3, with a new chairman at the helm, has stated its intention to resume its leadership position by next year, and return to profitability. It has an alliance with Intel to cross license each other's chips; International Business Machines Corp. and Compaq Computer Corp. have already stated their intention to use S3's chips in 1999. Also, the firm has agreements with a Taiwanese chip developer, and Singapore's largest manufacturer of audio cards, Creative Technology Inc. But in a vote of confidence for ATI's continued leadership role, Ms. Streeter is recommending investors buy ATI shares. She has a 12-month target price of $20 on the stock. Ms. Streeter is not alone with her bullish opinion. Seven of eight analysts who cover ATI rate its stock as a "buy," with 12-month target prices as high as $24. In the past year ATI shares (ATYT/NASDAQ) have traded between $9 5/8 and $18 3/16. They closed yesterday down 1/4 at $14 3/8. Investors drove the shares to a December low on concerns that ATI's $70.9-million acquisition of Chromatic Research Inc. would be dilutive to earnings, and that it would not add directly to revenue for at least a year. However, analysts say that Chromatic's system-on-a-chip technology, allowing for multiple functions on a single chip, is the future of the industry as a whole, and an integral part of ATI's strategy to maintain its leadership position. "Chromatic is dilutive, but in my mind it's where the industry is going and ATI needed to make inroads in that space," says Ms. Streeter. Also troubling investors were warnings from original equipment manufacturers, including Dell Computer Corp. and Compaq, that sales were slowing and margins were coming under increased pressure. ATI's customers include the 15 largest PC manufacturers, so its fortunes are tied to continued strength in computer sales. Ms. Streeter points out that ATI has maintained its gross margins at a "very stable rate", and they are holding at about 36.7%. ATI is also strengthening its position in the sub-$1,000 market, which is the fastest growing segment of the personal computer market, says Ms. Streeter. In the first six months of fiscal 1999, ended Feb. 28, ATI had net income of $71.8-million (33¢ a share) on revenue of $624-million, up from profit of $51.5-million (24¢) on revenue of $350-million in the same period a year earlier. Ms. Streeter estimates the firm will earn 72¢ a diluted share in 1999 and 92¢ a share in 2000, which compares with estimates by First Call Corp. of 71¢ and 90¢, respectively. ATI TECHNOLOGIES INC. CEO: K.Y. Ho Ticker: ATYT, ATY Listed: Nasdaq Stock Market; Toronto Stock Exchange Head office: 33 Commerce Valley Drive,East Thornhill, Ontario L3T 7N6