ATI expects lower revenues in Q3

Higher than expected demand "towards the lower end" of the desktop and notebook discrete (standalone) market as well yield issues caused graphics chip maker ATI to slash its revenue forecast for the current quarter. The company said it will see about $530 million in sales, which is about five percent lower than originally expected. Gross margin is estimated at 29 percent, operating expenses at $143 million.

While integrated graphics chipsets (IGPs) are apparently showing "dramatic" growth at this time, margins are affected negatively. IGPs typically are shipped in greater numbers than discrete products but bring much lower margins and profit potential - according to ATI "well below the corporate average". Lower than anticipated yields on certain products due to operational issues in the packaging and test area of the manufacturing process, also negatively impacted gross margin, ATI said.

ATI will report its fiscal 2005 third quarter financial and operating results on June 23.(THG)