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ATI Tech Takes Down Sales Estimates

Graphics chipmaker ATI Technologies (ATYT) warned Wednesday that sales for its fourth quarter will fall far short of analysts' estimates and the company's own prior guidance.

The company attributed the shortfall to lower-than-expected sales of its integrated chipsets for Intel (INTC - Get Report) processors and of its handheld graphics chips. ATI linked the disappointing Intel chipset sales to its recent decision to be acquired by AMD (AMD - Get Report), Intel's archrival.

"While we anticipated a decline in future Intel-based chipset business following the announcement of the acquisition agreement with AMD, the decrease occurred much sooner than we expected," said ATI CEO Dave Orton in a statement.

The company attributed the poor handheld sales to a "supply chain adjustment" by one of the company's major customers. Although the company did not name that customer, ATI's regulatory filings indicate that the bulk of its handheld business is with Motorola (MOT).

The warning marked the second time ATI has cautioned analysts to reduce their expectations for its fourth quarter, which ended Aug. 31. Following the news, the company's stock was off 30 cents, or 1.4%, to $21.10 in recent after-hours trading. The company's stock was off as much as 3% earlier in after-hours trading.

The company's stock might have traded lower, but the AMD bid likely is providing a floor for the stock. At current prices, AMD is offering about $22 a share in cash and stock for ATI.
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