Profit Swoons at Atheros

SAN FRANCISCO -- Atheros Communications'(ATHR) bottom line was cut in half in the first quarter, as write-offs, acquisition-related charges and higher expenses weighed down the chipmaker's results.

But the company said demand for its wireless networking chips is set to accelerate in the coming months, despite general fears that a sluggish economy will pinch sales of the PCs that incorporate its chips.

Santa Clara, Calif.-based Atheros reported sales of $114.5 million in the three months ended March 31, compared with $95.5 million at this time last year.

Analysts polled by Thomson Financial were expected $113.8 million in sales.

Whiles sales to PC makers were soft in the first quarter, due to seasonality and a weak economy, Atheros said overall revenue from its wireless network chips was particularly strong, thanks to healthy demand from retail customers and communications companies.

And Atheros' line of older 802.11G wireless chips have proven to have nice legs: The company's wireless chips are finding a niche in the nascent category of ultramobile notebooks epitomized by the Asus Eee PC.

"The sub-$500 PC segment is becoming increasingly important to Atheros," said CEO Craig Barratt in a post-earnings conference call.

He noted that Atheros is enjoying an advantage in the segment, since rival Intel(INTC) no longer offers Centrino-branded chips based on the older, less-expensive 802.11G standard.

Atheros posted net income of $3.4 million, or 6 cents a share, vs. $7.6 million, or 13 cents a share, in the year ago period.