Outlook Sinks ATI Shares

Shares of ATI Technologies ATYT plunged more than 12% Thursday after the graphics chipmaker offered a disappointing outlook for its current, or fourth, quarter and missed revenue estimates for the just-completed period.

The stock's decline came even though the company's third-quarter earnings topped the Street's expectations.

The second half of the company's just-completed quarter was weaker than expected, said ATI CEO Dave Orton in an interview with TheStreet.com. The company expects its results to rebound later this year as Intel'sINTC introduction of new chips and Microsoft'sMSFT introduction of its Vista update to its Windows operating system spur PC sales, Orton said.

But the company isn't certain when sales will pick back up, he said.

"We're excited about the back half of the year, but we don't know exactly the timing of the ramp," he said. "We thought it was prudent to be cautious."

But investors weren't pleased. In recent trading, ATI shares were off $1.65, or 10.7%, to $13.85. Earlier in the session, shares fell as much as $1.89, or 12.1%, to $13.61.

In its third quarter, which ended May 31, ATI earned $31.9 million, or 12 cents a share, in the quarter, compared with a loss of $400,000 a year ago. Sales rose 23% from a year ago to $652.3 million.

Excluding stock-options expenses and certain other charges, ATI would have earned 16 cents a share.

On this basis, analysts polled by Thomson First Call were expecting the company to earn 16 cents a share on sales of $661.3 million. In March, the company predicted that it would post sales of between $640 million and $680 million. It did not give a bottom-line forecast.

But it was the company's guidance for the current quarter that likely addled investors. The company is expecting sales of $620 million to $660 million for the quarter.